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FEB   6  1919 


STATEMENT 

OF 

Hon.  W.  G.  McADOO 

DIRECTOR  GENERAL  OF  RAILROADS 

BEFORE  THE 

Interstate  Commerce  Committee 

OF  THE 

UNITED  STATES  SENATE 

JANUARY  3,  1919 


UNITED  STATES  RAILROAD  ADMINISTRATION, 

WASHINGTON,  D.  C. 


GENTLEMEN  : 

RAILROAD  CONDITIONS  WHEN  GOVERNMENT  TOOK  CONTROL. 

To  review  the  results  of  the  past  year  of  Federal  control,  it  is  help- 
ful first  to  survey  the  railroad  conditions  that  immediately  preceded 
that  control. 

(1)  For  several  years  railroads  in  seasons  of  heavy  business  had 
developed  conditions  of  transportation  stringency  similar  to  the  con- 
ditions of  financial  stringency  that  characterized  our  banking  situa- 
tion prior  to  the  passage  of  the  Federal  Reserve  Act,  but  the  periods 
of  transportation  stringency  were  even  more  frequent  and  more  pro- 
nounced. It  was  impracticable  for  the  scores  of  different  railroad 
companies  to  depart  from  their  competitive  practices  and  join  in  a 
co-ordination  of  facilities  and  effort  so  as  to  meet  the  traffic  demand 
made  upon  them  and  enable  them  to  handle  their  "peak  load"  suc- 
cessfully. These  competitive  rivalries  prevented  any  sort  of  central 
control  of  the  traffic  itself.  Therefore  it  was  impossible  to  stop  the 
loading  of  traffic  which  could  not  be  promptly  disposed  of  at  destina- 
tion, or  to  encourage  movement  to  destinations  where  the  traffic  could 
l>e  promptly  handled.  To  an  important  extent  there  was  inadequacy 
of  terminal  facilities  and  a  serious  lack  of  co-ordination  and  use  of 
those  in  existence. 

In  the  fall  of  1916  the  transportation  stringency  reached 
such  a  point  that  traffic  was  almost  paralyzed  through  inability  to 
dispose  of  it  at  destination.  In  the  fall  of  1917,  despite  strenuous 
efforts,  and  yet  under  a  larger  degree  of  co-ordination  than  had  ever 
before  been  attempted  to  prevent  such  a  situation,  a  paralysis  of  the 
transportation  situation  again  occurred.  These  conditions  were  most 
aggravated  in  the  territory  east  of  Chicago  and  St.  Louis  and  north 
of  the  Ohio  and  Potomac  rivers,  but  the  acute  conditions  in  this  ter- 
ritory reacted  unfavorably  on  the  transportation  situation  through- 
out the  rest  of  the  country,  damming  up  the  traffic  on  connecting 
lines  and  producing  congestion  and  distress  throughout  the  country. 

The  seriousness  of  the  situation  is  shown  by  the  fact  that  on  Jan- 
uary 1,  1918,  there  were  reported  on  all  roads  a  total  of  nearly  145,- 
000  cars  accumulated  on  account  of  the  congestion  which  prevailed 
in  the  territory  east  of  Chicago  and  St.  Louis  and  north  of  the  Ohio 
and  Potomac  in  excess  of  the  normal  movement. 


386394 


Very  serious  conditions  of  car  shortages  existed  both  in  the  fall 
of  1916  and  in  the  fall  of  1917.  In  1916  the  situation  became  so 
critical  that  a  special  investigation  was  inaugurated  by  the  Inter- 
state Commerce  Commission,  with  the  result  that  under  date  of  De- 
cember 28,  1916,  Commissioner  McChord  made  a  report  in  which 
he  stated  that  ."in  some  territories  the -railroads  have  furnished  but 
a  small  part  of  the  cars  necessary  for  the  transportation  of  staple 
articles  .of  commerce,  such  as  coal,  grain,  lumber,  fruits,  and  veg- 
etables.'^ He  added:  "In  consequence,  mills  have  shut  down,  prices 
have  advanced,  perishable  articles  of  great  value  have  been  destroyed, 
and  hundreds  of  carloads  of  food  products  have  been  delayed  in 
reaching  their  natural  markets.  In  other  territories  there  have  been 
so  many  cars  on  the  lines  of  the  carriers  and  in  their  terminals  that 
transportation  service  has  been  thrown  into  unprecedented  confusion, 
long  delays  in  transportation  have  been  the  rule  rather  than  the  ex- 
ception, and  the  operation  of  established  industrial  activities  ha* 
been  uncertain  and  difficult.'' 

In  its  report  of  .December  1,  1916,  the  Interstate  Commerce  Com- 
mission, after  reviewing  the  car-shortage  situation  in  detail  and  tell- 
ing of  investigations  into  conditions  at  widely  separated  points,  said : 

'•'Substantially  all  told  the  same  story  of  failure  of  transporta- 
tion facilities  and  resulting  embarrassment '  and  losses.  It  abun- 
dantly appeared  that  the  movement  of  loaded  cars  was  in  the  main 
and  on  the  whole  very  slow.  The  time  of  movement  of  grain  from 
Iowa  points  to  Chicago  was  shown  to  be  as  low  as  two  days  and  as 
high  as  twenty-five  days,  the  greater  part  taking  from  four  to  eight 
days.  Serious  delays  to  loaded  cars  in  switching  to  points  of  un- 
loading at  large  terminals  and  in  passing  through  such  terminal? 
out  to  other  cities,  explained  much  of  the  failure  in  car  service." 

I  need  not  recount  the  varying  expedients  adopted  by  the  rail- 
roads under  private  control  to  bring  order  out  of  the  railroad  chaos, 
none  of  which  was  adequate  or  successful.  The  railroad  executives 
of  the  country  tried  valiantly  during  1917  to  solve  the  problem. 
Most  of  them  patriotically  sought  to  find  means  of  keeping  the  trans- 
portation system  functioning.  Competitive  and  private  control,  how- 
ever, were  unequal  to  the  task. 

(2)  The  great  movement  of  traffic  overseas  without  satisfactory 
co-ordination  of  rail  and  ocean  transport,  the  heavy  building  opera- 
tion in  the  way  of  construction  of  cantonments,  ship-building  plants, 
storage  depots,  munitions  plants,  etc.,  the  transfer  to  war  activities 
of  the  ships  and  tugs  of  the  coastwise  service,  thereby  throwing  still 
another  new  burden  on  the  railroads,  the  increasing  and  exacting 
movement  of  troops, — all  these  operated  to  accentuate  difficulties  and 


develop  the  grave  weaknesses  inherent  in  the  unco-ordinated  competi- 
tive activities  of  all  the  different  railroad  companies. 

(3)  These  difficulties  were  further  accentuated  by  inability  to 
get  promptly  new  locomotives  which  had  been  ordered  (but  which 
could  not  be  delivered  because  much  of  the  locomotive  output  was 
being  devoted  to  our  Allies)  and  to  an  entire  absence  of  any  locomo- 
tives in  the  reserves  of  the  railroad  companies. 

Many  lines  had  entirely  inadequate  facilities  for  repairing  the 
locomotives  they  own.  This  is  shown  by  the  fact  that  up  to  Decem- 
ber 14th  the  total  number  of  locomotives  sent  to  other  line  shops 
for  repairs  were  2,220.  For  instance,  423  locomotives  of  the  Balti- 
more &  Ohio  were  repaired  in  the  shops  of  other  lines,  while  B.  &  0. 
shops  repaired  only  24  locomotives  belonging  to  other  lines,  leaving 
the  net  assistance  received  by  the  B.  .&  0.  399  locomotives.  201 
locomotives  of  the  Penna.  Lines  West  were  repaired  in  other  line 
shops,  while  the  shops  of  the  Penna.  Lines  West  repaired  only  55 
locomotives  belonging  to  other  lines,  leaving  the  net  assistance  re- 
ceived by  the  Penna,  Lines  West,  146  locomotives.  36  locomotives 
of  the  Central  Railroad  of  New  Jersey  were  repaired  in  other  line 
shops,  whereas  they  repaired  no  locomotives  of  other  lines. 

Prior  to  Federal  control  the  railroads  had  voluntarily  transferred 
into  the  congested  eastern  territory  107  engines  from  the  west  and 
south.  The  Railroad  Administration,  in  addition,  put  into  service 
.in  the  east  130  locomotives  constructed  for  lines  in  the  west  and 
south.  In  addition,  the  Railroad  Administration  relocated  215 
locomotives  already  in  the  east.  This  ability  to  place  locomotives 
promptly  where  they  were  most  needed  regardless  of  the  interest  of 
any  particular  line  greatly  assisted  in  bringing  order  out  of  chaos. 

Notwithstanding  the  tonnage  handled  during  the  year,  which  has 
been  the  heaviest  ever  known,  there  are  now  stored  in  good  condition 
and  ready  for  winter  service  1189  locomotives,  while  one  year  ago 
there  was  not  a  single  serviceable  locomotive  in  storage.  This  im- 
proved condition  has  been  due  largely  to  the  co-ordination  of  shop 
work,  which  has  resulted  in  an  average  increase  of  20.93%  each  week 
in  the  number  of  locomotives  receiving  classified  repairs. 

(4)  The  relations  with  labor  were  of  the  most  unsatisfactory  and 
threatening  character.     The  cost  of  living  had  greatly  increased. 
Insistent  demands  were  urged  by  railroad  labor  for  corresponding 
increase  in  wages.     There  was  no  method  for  an  amicable  adjust- 
ment of  labor  disputes.     To  a  large  extent  there  appeared  to  be  a 
lack  of  confidence  on  the  part  of  labor  in  the  management  of  the 
railroad  companies,  if  not  an  actual  hostility  thereto.     There  was 
imminent  prospect  of  the  most  serious  strikes  that  had  ever  threatened 
the  railroad  situation. 


6 

(5)  The  financial  situation  of  some  of  the  railroad  companies 
was  precarious.     The  rapid  increase  in  operating  costs,  due  to  .in- 
creased prices  of  materials  and  supplies,  and  the  increased  expense 
of  operating  under  the  conditions  of  transportation  stringency,  were 
threatening  to  impair  the  ability  of  many  railroad  companies  to 
meet  their  interest  and  dividends,  so  that  the  railroad  plight  was  a 
serious  menace  to  the  general   financial   situation.     Even   if   rail- 
road credit  had  been  at  its  best,  instead  of  at  its  poorest,  it  would  have 
been  difficult  at  the  time  to  raise  funds  for  urgently  needed  capital 
expenditures  because  of  the  credit  demand  of  the  Government  and 
the  high  rates  prevailing  for  money. 

(6)  The  country  was  at  war.     Its.  industrial  power  was  being 
turned  into  war  channels.     The  volume  of  traffic  to  be  transported 
for  war  purposes  was  steadily  growing  and  promised  to  keep  growing 
to  a  degreee  which  could  not  be  foreseen.     The  nation's  success  in 
the  war  was  largely  dependent  upon  the   transportation  machine 
functioning  with  an  efficiency  surpassing  anything  which  had  eve/ 
been  known  in  the  past.     Yet  all  the  factors  were  rapidly  converging 
to  produce  a  prolonged  and  serious  transportation  paralysis. 

For  these  reasons  the  President  took  possession  and  control  of  the 
railroads  on  December  28,  1917. 

Simultaneously  with  his  proclamation  the  country  entered  upon 
(en  weeks  of  the  worst  winter  that  had  ever  been  known,  and,  trans- 
portation which  before  was  slowing  down  in  an  alarming  way, 
confronted  with  the  danger  of  almost  complete  stoppage. 

These  were  .the  conditions  under  which  (he  United  States  Railr 
Administration  began  its  work. 

CONDITIONS  UNDER  GOVERNMENT  CONTROL. 

The  principal  railways  and  transportation  systems  of  the  country 
have  now  been  under  the  control  of  the  Government  for  one  year, 
a  year  marked  by  the  participation  of  the  United  States  in  the 
greatest  war  in  history,  a  year  in  which  the  railroads  were  required 
to  carry  a  greater  burden  both  of  freight  and  of  passenger  traffic  than 
ever  before  in  their  history,  a  year  which  began  with  terrific  blizzards 
and  an  alarming  coal  shortage,  a  year  in  which  enormous  amounts 
of  foodstuffs  and  other  supplies  had  to  be  transported  through  tfn 
United  States  to  the  seaboard  for  shipment  abroad,  a  year  in  whicl 
an  army  of  millions  of  men  had  to  be'  transported  from  their  hom< 
to  camps  and  cantonments  and  then  to  the  seaboard  in  order  thai 
they  might  take  their  places  on  the  battlefields  of  France  an< 
Belgium. 


The  year  is  now  behind  us.  In  the  last  few  ^oVttis  there  has  been 
an  entire  absence  of  any  transportation  strMgendy,  although  the 
traffic  carried  was  the  heaviest  of  even  this  unprecedented  year.  The 
contrast  between  transportation  conditions  during  the  autumn  just 
passed  and  the  autumns  of  1916  and  1917  is  marked. 

I  shall  recount  some  of  the  things  that  have  been  accomplished : 
\ 

THE    MOVEMENT    OF    TROOP*. 

From  January  1st,  1918,  to  November  10th,  1918,  a  total  of 
6,496,150  troops  were  moved  over  the  American  railways.  4,038,91* 
having  been  transported  on  special  trains.  These  movements  re- 
quired a  total  of  193,002  cars  of  all  types,  including  167,232  coaches 
for  draft  and  regular  train  movements.  These  troops  were  trans- 
ported in  comparative  freedom  from  accident,  due  largely  to  the 
steadfast  maintenance  of  a  reasonable  rate  of  speed. 

To  insure  proper  care  and  orderly  movement  of  th«j  immense  body 
of  men  comprising  the  American  army  and  navy,  a  special  organi- 
zation has  been  built  up,  including  a  railroad  representative  stationed 
at  the  office  of  each  State  adjutant  general  to  cooperate  in  the  trans- 
portation of  drafted  men,  a  man  in  charge  of  troop  movements  on 
each  principal  railroad,  and  a  central  oraiMiii/ntion  under  ih-e  Kail- 
road  Administration  in  \Vashin<;ton. 

%  An  average  of  12,2  cars'  per  train  was  used  in  the  movement  of 
troops  and  the  spued  was  kept  down  to  an  average  of  20  mile?  per 
hour.  The  special  troop  trains  averaged  443  men. 

To  allow  soldiers -and  sailors  on  leave  to  visit  their  familier  ,n 
home,  the  Railroad  Administration  put  into  effect  a  special  rate  of 
one  cent  a  mile  for  men  on  furlough — an  accommodation  which 
added  to  morale  and  permitted  many  soldiers  and  sailorfc  to  see  their 
loved  ones  who  otherwise  could  not  have  afforded  it.  A  special  rate 
of  75  cents  for  meals  costing  civilians  $1.00  and  $1.25  was  made  for 
soldiers  and  sailors.  No  certificates  were  required  for  such  meals,  the 
uniform  of  a  soldier  or  sailor  being  all  that  was  necessary. 

After  the  signing  of  the  armistice  and  the  beginning  of  demobili- 
zation an  effort  was  made  to  have  the  War  Department  to  discharge 
the  men  at  their  homes,  but  this  plan  having  been  rejected,  and  the 
travel  and  sustenance  allowance  fixed  by  Congress  having  been  lim- 
ited to  3y2  cents  a  mile,  the  Railroad  Administration  continued  the 
75-cent  meals  for  discharged  soldiers  and  sailors  and  allowed  them 
a  reduced  rate  of  2  cents  per  mile  while  returning  home. 

Hardly  had  the-  movement  of  troops  overseas  gotten  well  under 
way  before  the  armistice  was  signed  with  the  Central  Powers  and 


the  work  of  demobilizing  was  begun.  It  is  estimated  that  to  de- 
mobilize troops  under  arms  will  involve  the  transportation  of  not 
less  than  7,250,000  men ;  for  the  creation  of  the  army  and  the  send- 
ing of  approximately  2,000,000  men  to  the  points  of  embarkation 
involved  the  movement  of  8,700,000  men. 

At  the  peak  of  the  activities  incident  to  the  prosecution  of  the  war 
it  was  necessary  to  provide  for  the  daily  movement  to  and  from 
industrial  plants  and  camps  of  205,587  persons  in  each  direction. 
To  perform  this  work  2,319  passenger  equipment  cars  were  in 
daily  use. 

MOVEMENT  OF  FOOD  TO  EUROPE. 

The  food  situation  in  the  allied  countries  of  Europe  became  ex- 
tremely critical  in  February  last,  representations  being  made  by 
Great  Britain,  France,  and  Italy  that  unless  the  program  of  food 
deliveries  promised  by  the  Food  Administration  was  kept  pace  with, 
Germany  and  her  associates  inevitably  would  win  the  war.-*  While 
the  facts  could  not  be  told  at  the  time,  because  of  the  possible  effect 
on  the  morale  of  the  nations  fighting  the  Central  Powers,  it  was 
nevertheless  true  that,  according  to  official  word  received  from  the 
Kutente  Allies,  the  outcome  of  the  war  depended  upon  the  ability  of 
the  American  railways  to  transport  sufficient  supplies  of  foodstuffs 
to  the  Atlantic  seaboard  for  shipment  abroad.  This  problem'  \va> 
met.  It  was  no  time  for  half-way  measures.  The  safety  of  the 
world  hung  in  the  balance.  Empty  box  cars  were  rushed 'from  all 
portions  of  the  east,  south,  to  the  southwestern  grain  States.  Con- 
II it-ting  traffic  of  all  kinds  was  held  up.  Every  facility  of  the  Kail- 
road  Administration  and  of  the  railroads  under  its  jurisdiction  was 
thrown  into  the  balance.  Officials  and  employees  worked  day  and 
night.  The  result  was  magnificent.  By  March  15th  the  vessel  capac- 
ity of  the  Allies  had  been  satisfied  and  there  was  available  at  .North 
Atlantic  ports  an  excess  on  wheels  of  6,318  carloads  of  foodstuffs, 
exclusive  of  grain  on  cars  and  in  elevators. 

Since  that  time  there  has  never  been  any  danger  of  the  American 
railways  failing  to  transport  the  necessary  amount  of  food  supplies 
for  Europe.  It  perhaps  is  not  too  much  to  say  that  this  was  one  of 
the  turning  points  in  the  war. 

In  the  period  from  July  to  November,  1918,  135,000  more  cars 
of  grain  were  handled  than  in  the  same  months  of  1917,  thus  demon- 
strating the  enormous  extra  strain  placed  upon  the  railroads  by  this 
one  item  alone. 


COAL. 

Another  critical  situation  which  faced  the  railroads  during-  the 
year  just  passed  and  was  met,  had  to  do  with  the  coal  supply.  \  Con- 
stant predictions  have  been  made  that  the  railroads  would  notvfunc- 
tion  sufficiently  to  transport  enough  coal  to  supply  the  Nation's 
needs;  these  predictions  have  not  been  realized.  New  England's 
demands  have  been  met,  and  28,153,317  tons,  the  largest  tonnage  of 
coal  ever  known,  has  been  moved  to  the  Lake  Erie  ports,  and  trans- 
ported to  the  North  w'est.  In  1917  only  26,826,000  tons  were  moved 
over  this  route;  in  1916  only  24,692,000  tons,  and  in  1915  only 
21,507,000  tons. 

Some  indication  of  the  freight  traffic  problems  facing  the  rail- 
roads in  the  year  just  passed  may  be  gained  from  the  fact  that  there 
was  a  net  increase  of  741,666  cars  or  approximately  37,083,300  tons 
of  bituminous  coal  loaded  during  the  ten  months  ending  October 
31,  1918,  as  compared  with  the  same  ten  months  in  1917.  This  in- 
crease was  achieved  despite  the  fact  that  the  severe  weather  conditions 
prevailing  in  January,  1918.  resulted  in  a  decreased  production,  due 
largely  to  car  supply,  of  65,594  carloads.  The  severe  weather  con- 
ditions continued  throughout  February  and  part  of  March,  but  never- 
theless the  railroads  recovered  themselves  and  in  February,  1918, 
loaded  an  increase  of  24,366  cars  of  bituminous  coal  over  February, 
1917. 

MOVEMENT  OF  OTHER  ESSENTIAL  SUPPLIES. 

At  the  same  time  special  attention  was  being  given  to  the  move- 
ment of  fruits,  of  cotton,  of  oil,  of  iron,  and  of  the  other  principal 
products  of  the  farms,  the  factories,  and  the  mines  of  America. 
Wherever  necessary,  special  trains  were  utilized  to  transport  these 
staple  articles,  and  other  methods  were  made  available  which  resulted 
in  fully  meeting  the  situation. 

For  instance,  in  April?  conditions  were  chaotic  in  the  oil  industry 
and  a  great  many  of  the  refineries  in  the  Mid-Continental  fields,  in 
particular,  were  shut  down  or  only  partially  operating  account  of 
shortage  of  equipment.  The  Railroad  Administration  arranged  to 
consolidate  oil  shipments  into  train  loads,  symbol  it,  and  move  it 
through  to  destination  or  breaking  point  in  solid  train  loads.  So 
effective  were  these  measures  that  Mr.  W.  E.  MacEwen,  Chairman  of 
the  Transportation  Committee  of  the  Western  Petroleum  Refiners' 
Association,  voluntarily  wrote  on  December  16,  1918,  as  follows: 

"  With  out  going  into  the  details  of  the  matter,  it  suffices  to 
say  that  within  thirty  days  there  was  such  an  improvement 


10 

that  from  that  time  on  there  was  never  a  shortage  of  tank  cars 
in  the  oil  industry  in  the  Western  field.  There  never  was  a 
demand  made  upon  the  Western  oil  industry  that  they  were 
not  able  to  meet  so  far  -as  transportation  facilities  were  con- 
cerned. There  never  was  a  time  that  there  was  not  at  least 
.a  day  and  a  half's  loading  of  cars  on  hand.  During  the  first 

10  months  of  the  year  there  was  loaded  from  the  Mid-Con- 
tinent field  256,082  cars,  compared  with  200,603  cars  for  the 
same  period  1917,  an  increase  of  55,479  cars,  with  practically 
no  increase  in  the  amount  of  equipment.     From  April  20th 
to  November  30th,  inclusive,  there  was  loaded  from  the  Mid- 
Continent  field  a  total  of  3.585  solid  trains  of  oil,  containing 
100,530  cars. 

"In  the  month  of  January  the  mileage  per  car  per  day  on 
tank  cars  of  Western  refiners  was  26.16 ;  in  June  56.27,  and  in 
September  58.4, — an  increase  of  one  hundred  per  cent 'in 
the  mileage  performance.  What  was  accomplished  in  the 

011  industry  is  one  of  the  most  concrete  illustrations  •  in  the 
history  of  railroading  of  the  economic  gain  by  the  co-opera- 
tion between  the  shipping  public  and  the  railroads." 

> 

BUREAU    FOR   SUGGESTIONS    AND   COMPLAINTS. 

In  order  to  furnish  the  public  a  medium  for  communicating 
directly  with  the  Railroad  Administration  concerning  bad  service, 
the  Bureau  for  Suggestions  and  Complaints  was  established  with  very 
helpful  results.  Many  constructive  criticisms  have  been  received 
and  acted  on.  A  total  of  1,328  commendations  and  714  complaints 
of  individual  discourtesy  or  incompetence  have  been  received  during 
the  16  weeks  since  the  formation  of  the  Bureau  to  December  24, 
1918.  The  commendations  have  outnumbered  the  complaints 
almost  two  to  one.  This  in  itself  is  a  tribute  to  the  railroad  employees 
of  the  Nation.  Other  letters  have  been  received  calling  attention  -to 
"organic"  defects  in  railroad  service.  A  sharp  decrease  in  the  num- 
ber of  complaints  has  marked  the  return  of  peace  and  the  consequent 
improvement  of  service. 

PROPERTY    PROTECTION. 

Promptly  after  the  inauguration  of  Federal  control,  attention  was 
directed  toward  minimizing  the  enormous  drain  upon  railroad  rev- 
enues as  a  result  of  loss  as  well  as  damage  to  freight  and  the  activities 
of  thieves.  When  this  work  was  begun,  it  was  found  that  shipments 
of  all  kinds  were  being  tampered  with  and  stolen.  Goods  of  all  kinds 
were  taken,  even  Army  supplies,  Red  Cross  shipments  and  Belgian 
Relief  shipments.  While  there  are  not  available  authentic  statistics 
as  to  the  volume  of  thefts  from  carriers  in  recent  years,  for  1914, 


11 

carriers  reported  to  the  Interstate  Commerce  Commission,  a  total  of 
$10,310,780.41  of  thefts  of  merchandise  from  cars  and  terminals, 
including  concealed  and  unlocated  losses.  The  principal  thefts  have 
been  of  four  classes :  • 

(1)  Thefts  of  merchandise-  from  cars  and  terminals. 

(2)  Thefts  of  tools,  machinery,  appliances,  brasses,  etc, 

(3)  Padded  payrolls. 

(4)  Embezzlements. 

The  following  statistics  reflect  the  activities  as  far  as  reported  to 
the  Railroad  Administration  of  the  police  agencies  of  the  carriers 
under  the  direction  of  the  Railroad  Administration-  from  April  1. 
1918,  to  December  1,  1918: 

Arrests  for  thefts .' .  .  .         10,530 

Convicted    6,069 

Pending 2,075 

Employees   arrested 3,241 

Value  of  goods  recovered '. $667,578 . 54 

Number  of  sentences  imposed  of  one  year  or  over.  .  .  .  1,095 

Fines  imposed . . .  .    $150,509.63 

ECONOMIES. 

During  the  war  period,  essential  war  necessities  had  to  be  met 
regardless  of  cost.  In  peace  time,  naturally,  one  of  the  chief  aims  of 
railroad  operation  should  be  the  saving  of  money.  But  even  though 
expense  could  not  be  made  the  first  consideration  during  the  war, 
strict  attention  was  given  to  this  poi,nt  and  orders  were  issued  to 
effect  savings  wherever  possible  without  interfering  with  the  war 
program.  Many  of  the  economies  brought  about,  such  as  re-routing, 
common  use  of  terminals,  etc.,  will  be  reflected  but  slightly  in  the 
operating  income  accounts  of  the  carriers  for  the  year  1918.  They 
will  appear  fully  in  the  statements  for  the  year  1919.  Nevertheless, 
reports  so  far  received  from  five  of  the  seven  Regions  show  that  on 
a  group  of  selected  principal  items,  savings  totaling  $85,576,424.71 
have  been  effected  in  the  period  from  December  31,  1917r  to  Decem- 
ber 31,  1918,  Reports  from  the  two  remaining  regions  are  not  yet 
available. 

The  specific  items  which  produced  this  saving  include  the  unifica- 
tion of  terminals  and  stations,  the  elimination  of  passenger  service, 
reductions  in  organizations,  and  miscellaneous  economies. 

Equipment  has  been  saved  by  the  elimination  of  non-essential 
passenger  trains;  by  the  common  use  of  freight  cars;  the  common 


12 

use  of  repair  shops;  the  emergency  use  of  the  Pennsylvania  Hudson 
River  tubes  for  the  movement  of  anthracite  coal  from  the  Jersey 
Terminals  to  Long  Island,  a  step  which  could  not  have  been  taken 
under  private  control;  the  introduction  of  the  coal  zone  plan  in  co- 
operation with  the  Fuel  Administration,  which  resulted  in  the  saving 
of  car  miles  and  permitted  the  production  and  transportation  of 
several  million  tons  more  coal  than  would  otherwise  have  been  pos- 
sible ;  the  utilization  of  the  Cape  Cod  Canal  for  the  transportation  of 
coal  to  New  England ;  the  operation  of  locomotives  under  steam  from 
factories  to  the  point  of  delivery,  instead  of  hauling  them  as  dead 
freight  in  the  past;  the  introduction  of  the  "sailing  day  plan"  for 
less  than  carload  freight;  the  establishment  of  special  organizations 
to  handle  refrigerator  and  tank  cars  and  the  elimination  of  circuitous 
routes. 

During  the  first  seven  months  of  Federal  control  alone,  an  aggre- 
gate of  21,000,000  passenger  train  miles  a  year  was  done  away  with 
in  the  territory  west  of  Chicago  and  the  Mississippi  River,  while  in 
the  Eastern  territory,  26,420,000  passenger  train  miles  were  elimi- 
nated. Without  this  saving  in  motive  power  and  equipment  the 
moving  of  millions  of  troops  could  not  have  been  achieved  success- 
fully. 

UNIFICATION   OF  TERMINALS. 

It  ha vi  11  L:,  been  shown  that  bad  terminal  conditions,  were  proving 
a  serious  handicap  to  the  necessary  transportation  business.  Terminal 
Managers  were  appointed  at  the  larger  terminals  with  jurisdiction 
over  the  facilities  of  all  lines.  Successful  efforts  luiv  :  made  to 

route  freight  so  as  to  arrive  at  the  specific  terminal  where  it  was  to 
be  disposed  of.  Interchange  switching  in  terminals  has  been  largely 
eliminated.  The  report  on  operations  and  the  reports  of  the  various 
regional  directors  will  give  in  detail  what  has  been  accomplished  in 
this  respect,  but  it  is  worth  noting  at  this  point  that  at  the  Chicago 
Terminals  it  has  been  the  practice  in  the  past  to  reconsign  practically 
all  coal  after  arrival.  Under  Federal  control,  as  a  result  of  go-opera- 
tion with  producers,  sixty-six  per  cent  of  the  coal  arriving  in  Chicago 
during  August  was  consigned  directly  to  consumer  from  the  mines 
and  cross-hauling  between  terminal  lines  was  greatly  reduced 
through  the  same  co-operation. 

Marked  convenience  to  the  public  resulted  from  the  utilization 
of  the  Pennsylvania  Station  at  New  York  by  the  Baltimore  &  Ohio 
and  Lehigh  Valley  passenger  trains. 


13 

SOLID  TRAINS. 

In  order  to  meet  the  extraordinary  war  demand,  and  .rush  food 
and  other  supplies  through  to  destination,  arrangements  were  made 
early  in  the  year  for  the  forwarding  of  consolidated  trains  of  export 
freight,  principally  war  supplies,  of  food,  grain,  munitions,  etc. 
Under  this  arrangement,  a  total  of  5,090  special  export  trains  have 
been  handled  from  Western  terminals,  containing  124,198  cars  of 
export  freight,  in  the  Eastern  Region,  the  trains  being  filled  out  with 
other  freight  to  make  the  full  trainload  as  required.  With  the  con- 
currence and  co-operation  of  shippers,  plans  were  made  to  put  into 
effect  in  June  for  assembling  live  .stock,  fresh  meat,  live  and  dressed 
poultry,  and  perishable  freight,  in  solid  trains,  and  forwarding  them 
from  Chicago,  St.  Louis,  Cincinnati,  •  Buffalo,  and  other  Western 
points,  on  specific  days  of  the  week,  via  roads  best  fitted  to  handle 
them,  resulting  in  a  reduction  in  the  feeding  requirements  for  live 
stock  and  in  the  number  of  fast  freight  trains  required  to  handle.  In 
the  Eastern  Region,  the  decrease  in  Chicago  alone  has  been  11  trains 
per  day,  and  the  average  cars  per  train  of  high-class  and  perishable 
freight  has  been  increased  from  23  to  36.  Grain,  oil,  and  cotton  are 
being  consolidated  and  forwarded  in  trainload  lots  from  Western 
points,  resulting  in  a  large  saving  in  labor,  in  switching,  eliminating 
cross  hauls  and  facilitating  movements.  In  the  Eastern  Region 
alone,  a  total  of  981  special  oil  trains  have  been  run  since  June  1st, 
containing  a  total  of  25,034  cars. 

ELIMINATION  OF  CIRCUITOUS  ROUTES. 

One  of  the  most  wasteful  practices  in  railroad  operation  in  the 
past  has  been  the  use  of  circuitous  routes  in  the  handling  of  freight 
traffic,  often  for  competitive  reasons.-  General  Order  Number  One  di- 
rected that  everything  possible  be  done  to  alter  this  condition.  In 
order  to  economize  in  rolling  stock  and  motive  power  comprehensive 
studies  were  undertaken  for  the  purpose  of  developing  new  routes 
which  would  not  only  be  shorter  but  more  economical  and  efficient. 
As  a  result,  car,  engine,  and  train  miles  have  been  saved,  and  the  ship- 
ping public  has  been  benefited,  because  more  cars  have  been  avail- 
able and  more  expeditious  movement  of  traffic  has  been  secured. 
Shippers  were  not  responsible  for  the  former  extensive  use  of  circuit- 
ous and  uneconomical  routes,  as  this  routing  was  largely  influenced 
by  the  agents  of  the  interested  railroads.  Shippers  have  gladly  re- 
sponded to  what  are  now  the  combined  efforts  of  all  railroad  repre- 


14 

i 

sentatives  under  Federal  control  to  influence  the  use  of  direct  and 
economical  routes,  and  consequently  the  original  routing  as  specified 
by  shippers  is  now,  generally  speaking,  in  accordance  with  the  es- 
tablished routing  instructions,  and  extensive  diversions  are-  unneces- 
sary. Therefore  the  increase  in  efficiency  cannot  be  measured  by  the 
car  miles  saved  through  diversions  of  freight  in  transit.  The  sav- 
ings in  distance  via  many  of  the  new  routes  is  so  great  as  to  merit 
special  mention.  One  from  Los  Angeles  to  Dallas  and  Fort  Worth 
is  over  500  miles  shorter  than  the  one  formerly  used;  another  from 
the  oil  fields  of  Casper,  Wyoming,  to  Montana  and  Washington  State 
points  is  880  miles  shorter ;  fruit  from  southern  California  to  Ogden 
is  hauled  201  miles  less;  and  a  new  route  between  Kansas  City  and 
Galveston  has  been  developed  which  is  289  miles  shorter  than  the 
1,121  miles  previously  traversed  via  one  of  the  lines.  Tfye  ore  traffic 
moving  from  Minneapolis  and  Michigan  mines  to  Lake  Superior 
and  Lake  Michigan  ports  was  rerouted  with  gratifying  results.  Dur- 
ing the  ore  shipping  season,  a  total  of  64,770  loaded  and  empty >cars 
were  rerouted  with  a  saving  of  3,577,464  car  miles.  A  few  other 
typical  cases  of  shortening  of  routes  follow : 


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In  a  few  instances  it  has  been  necessary  to  increase  the  length  of 
hauls  temporarily  to  avoid  accumulations. 

By  rerouting,  a  total  of  16,863,633  car  miles  has  been  saved  in 
the  Eastern  and  Northwestern  Regions  alone. 


BETTER  OPERATION. 

The  operating  results  may  be  summarized  briefly:  The  railroads, 
during  the  first  ten  months  of  Federal  control,  produced  1.9%  more 
ton  miles  with  a  decrease  of  2.1%  in  train  miles  and  a  decrease  of 
5.8%  in  loaded  car  miles.  The  average  trainload  increased  from 
655  tons  to  682  tons,  a.  gain  of  4.1%;  and  the  average  carload  in- 
creasedfrom  26.8  tons  to  29.0  tons,  a  gain  of  8.2%. 

The  increase  in  traffic  in  1918  was  accomplished  by  the  use  of  ap- 
proximately 3.4%  more  freight  cars  and  approximately  1.4%  more 
freight  locomotives  than  in  1917.  Compared  with  1916,  the  1918 
increase  in  freight  cars  was  .6.9%  and  the  increase  in  freight  locomo- 
tives was  2.4%. 

It  should  be  explained  that  the  total  ton  miles  handled  are  much 
less  than  they  would  have  been  in  the  past  for  a  corresponding 
volume  of  traffic  by  reason  of  cutting  out  circuitous  hauls.  The  gen- 
eral statement  may  be  made  that  the  actual  transportation  produc- 
tion is  »Toat<T  than  is  indicated  by  ton-mile  statistics.  In  whatever 
degree  the  actual  performance  of  moving  tons  from  om;  place  to  an- 
other place  as  required  is  accomplished  by  moving  the  tonnage  over 
shorter  routes,  to  that  degree  the  ton-mile  statistics  understate  the 
real  performance  when  they  are  compared  with  a  period  when  the 
.shorter  routes  were  not  used. 

THE    PERMIT    SYSTEM. 

Probably  it  would  not  have  been  possible  to  meet  the  enormous  de- 
mands made  upon  the  transportation  system  during  the  past  year 
without  the  utilization  of  the  permit  system,  which  prevents  the  load- 
ing of  traffic  in  the  absence  of  assurance  that  it  can  be  disposed  of  at 
destination.  This  is  a  reform,  which  under  Government  control 
would  succeed  in  peace  times  as  well  as  in  war  times  and  is  one  of 
the  most  important  means*  of  preventing  transportation  stringency  or 
congestion.  It  means  .controlling  the  traffic  at  the  source,  in  the 
public  interest,  instead  of  letting  the  traffic  choke  the  public  interest 
at  destination. 


17 


WAR  CHANGES. 

Some  of  the  means  used  to  bring  about  the  desired  result  were 
strictly  war  measures  and  probably  could  not  or  should  not  be  utilized 
in  time  of  peace.  For  instance  this  is  true  with  regard  to  the  elim- 
ination of  many  passenger  trains,  although  passenger  trains  run 
merely  for  competitive  reasons  are  often  wasteful  and  do  not  give 
the  needed  service  to  the  public. 

The  Exports.  Control  Committee,  which  has  played  a  vitally  im- 
portant part  in  the  proper  handling  of  supplies  for  overseas  ship- 
ment, probably  could  not  be  operated  under  peace  conditions,  al- 
though under  unified  control  an  important  adjustment  of  traffic  to 
port  capacity  will  be  practicable,  even  under  peace  conditions. 

REFORMS  WHICH   SHOULD  BE      CONTINUED  UNDER  PEACE  CONDITIONS. 

Many  of  the  changes  in  railroad  operation  inaugurated  during  the 
period  of  the  last  year  should  prove  of  permanent  value  and  should 
continue  if  possible  whatever  form  of  control  is  decided  upon  for 
the  railroads.  Such  reforms  include: 

v/1.  The  maintenance  of  the  permit  system  so  as  to  control  the 
traffic  at  its  source. 

v2.  The  maintenance  of  heavy  loads  for  cars. 

<3.  The  pooling  of  repair  shops. 

\A.  The  elimination  of  circuitous  routes.  ,. 

v5.  The  unification  of  terminals. 

vt3.  The  maintenance  of  the  "sailing  day  plan." 

«^7.  The  consolidation  of  ticket  offices. 

¥fS.  The  utilization  of  universal  mileage  tickets. 

\fi.  The  standardization  of  equipment. 

10.  The  maintenance  of  the  uniform  freight  classification  intro- 
duced by  the  United  States  Railroad  Administration. 

^11.  The  maintenance  of  common  time  tables  between  important 
points. 
^12.  The  maintenance  of  high  demurrage  rates  and  uniform  rules. 

13.  The  establishment  of  through  waybilling  freight  from,  point 
of  origin  to  destination. 

14.  Rendering  unnecessary  the  rebilling  by  connecting  or  inter- 
mediate routes. ' 

15.  The  elimination  of  the  old  practice  of  paying  in  mileage  or 
per  diem  rental  for  the  use  of  freight  or  passenger  cars  of  one  carrier 
by  another. 

16.  The  simplification  of  the  old  practice  of  apportioning  interline 
passenger  revenue.  v 


18 

«/17.  The  utilization  of  water  routes  for  the  relief  of  crowded  rail 
lines. 

WASTEFUL  COMPETITION. 

Some  of  these  reforms  can  be  continued  should  the  roads  be  re- 
turned to  private  operation ;  others  cannot.  Competition  and  self- 
interest  dictate  that  when  the  roads  are  under  private  control,  each 
carrier  gets  as  much  business  as  possible  and  keeps  it  regardless  of  the 
fact  that  the  aggregate  result  may  be  wasteful  and  uneconomical. 
For  instance,  where  two  or  more  competing  lines  operate  between  two 
important  cities  the  convenience  of  the  public  can  best  be  served  if  al- 
ternating trains  be  operated  at  short  intervals  over  the  different  roads. 
Competition,  however,  always  results  in  each  of  the  roads  "bunching" 
their  trains  at  the  times  when  the  demand  for  transportation  is  the 
heaviest.  Competing  lines  can  hardly  be  expected  to  route  freight 
over  the  lines  of  competitors  even  though  these  competing  lines  may 
have  the  shorter  route  and  be  able  to  handle  this  particular  traffic 
more  economically.  Lanes  with  advantageous  terminal  facihties 
cannot  be  expected  under  private  control  to  place  such  facilities  at 
the  disposition  of  competitors  operating  under  less  favorable  circum- 
stances. One  company  will  not  forego  loading  and  hauling  traffic, 
even  though  this  seriously  embarrasses  the  general  situation,  because 
its  connections  cannot  conveniently  receive  and  dispose  of  the  traffic. 
Private  carriers  may  not  enforce  rules  which,  although  designed  to 
bring  about  efficiency  and  economy,  might  drive  business  away  from 
their  lines.  All  the  waste  resulting  from  these  practices  and  run- 
ning into  huge  costs  is  paid  for  by  the  public  in  the  form  of  in- 
creased rates. 

PUBLIC-SERVICE   FREIGHT    BUREAUS. 

Under  private  control  of  railroads,  and  for  competitive  reasons, 
practically  all  railroads  maintain  so-called  off-line  agencies,  the  orig- 
inal function  of  which  was  solicitation  of  traffic.  These  off-line 
agencies  were  abandoned  by  the  Railroad  Administration  for  the 
reason  that  the  competitive  causes  which  gave  rise  to  their  establish- 
ment no  longer  existed'.  It  was  found,  however,  that  in  some  meas- 
ure these  agencies  had  performed  real  service  to  the  public,  and 
therefore  the  establishment  of  public-service  freight  bureaus  has  been 
begun  with  a  force  trained  to  handle  for  shippers  matters  which  were 
formerly  handled  by  the  off-line  agencies. 

LABOR. 

The  participation  of  America  in  the  European  war,  with  the  con- 
sequent shortage  in  man-power  available  in  this  country  and  the 


19 

increase  in  the  cost  of  living,  has  made  the  railroad  labor  problem 
a  difficult  one  during  the  past  year.  However,  the  great  bulk  of 
railroad  labor  has  demonstrated  a  fine  spirit  of  patriotism  and  has 
co-operated  heartily  with  the  Government.  The  labor  troubles  which 
were  facing  the  railroads  when  they  went  under  Government  control 
were  practically  all  eliminated,  and,  with  a  few  exceptions,  there  has 
been  quiet  in  the  railroad  labor  world  during  the  last  twelve  months. 

In  order  to  place  railroad  labor  upon  a  living  wage  and  provide 
fair  working  conditions  an  investigation  into  labor  conditions  on  the 
railroads  was  begun  immediately  after  the  carriers  were  taken  by 
the  Government,  with  the  result  that  many  reforms  in  working  con- 
ditions, decreases  in  the  hours  of  labor  and  increases  in  the  rates  of 
pay  have  resulted.  These  investigations  have  been  continued  since 
the  machinery  was  set  up  for  the  thorough  investigation  and  hearing 
of  all  grievance  and  representations  about  wages  and  working  con- 
ditions. This  machinery  generally  has  recognized  the  so-called  "bi- 
partisan" principle  of  equal  representation  of  employer  and  em- 
ployee- on  boards.  Decisions,  however,  have  always  been  made  by 
the  Director  General,  since  he  is  charged  with  that  responsibility  as 
the  chief  representative  of  the  Government.  A  Director  of  Labor 
was  appointed  in  the  person  of  W.  S.  Carter,  President  of  the  Broth- 
erhood of  Railway  Engineers  and  Firemen,  who  was  placed  on  an 
equal  footing  with  the  heads  of  other  divisions. 

The  critical  labor  conditions  are  strikingly  brought  out  in  the 
report  of  the  Railroad  Wage  Commission,  composed  of  Honorable 
Franklin  K.  Lane,  Secretary  of  the  Interior;  Charles  C.  McChord, 
William  R.  Wilcox,  and  J.  Harry  Covington,  appointed  January 
18th,  1918,  to  "make  a  general  investigation  of  the  compensation 
of  persons  in  railroad  service,  the  relation  of  railroad  wages  to  wages 
in  other  industries,  the  conditions  respecting  wages  in  different  parts 
of  the  country,  the  special  emergency  respecting  wages  which  exists 
at  this  time,  owing  to  war  conditions  and  high  cost  of  living,  as  well 
as  the  relation  between  different  classes  of  railroad  labor.7' 

This  commission  heard  representatives  of  every  class  of  employees, 
railroad  officials  and  experts  on  the  subject  and  examined  hundreds 
of  written  statements  and  personal  letters  from  employees.  The  re- 
quests presented  to  the  commission  for  wage  increases,  if  granted, 
would  have  involved  an  outlay  of  something  over  one  billion  dollars 
per  year  in  excess  of  wages  paid  in  1917.  In  its  report  the  com- 
mission, after  reciting  the  various  demands  for  wages  made  by  rail- 
road labor  in  1916  and  1917  and  reviewing  increases  given  by  the 
railroads  under  private  control,  said : 

"But  these  advances  were  not  in  any  way  uniform,  either  as  to 


20 

employments,  or  as  to  amounts,  or  as  to  roads,  so  that  one  class  of 
labor  benefited  much  more  than  another  on  the  same  road,  and  as 
between  roads,  there  was  the  greatest  divergence.  The  situation  has 
been  dealt  with  as  pressure  made  necessary,  and  naturally  those  who. 
by  organization  or  through  force  of  competition,  could  exert  most 
pressure  fared  best.  Things  came  to  a  head  just  before  the  Govern- 
ment took  over  the  railroads.  Another  three  months  of  private  man- 
agement and  we  would  have  seen  much  more  extensive  concessions 
in  wages,  or  there  would  have  followed  an  unfortunate  series  of  labor 
disturbances.  The  Government  therefore  has  now  to  meet  what 
would  have  come  about  in  the  natural  course. 

"Indeed,  the  patience  of  the  men  was  only  allayed,  after  Govern- 
ment intervention,  by  the  assurance  that  the  matter  of  wages  would 
be  promptly  taken  up  and  that  the  awarded  increases  would  be 
retroactive  as  of  January  1st  of  this  year." 

The  Commission  also  said : 

"It  has  been  a  somewhat  popular  impression  that  railroad  em- 
ployees were  among  the  most  highly  paid  workers,  but  figures,  gath- 
ered from  the  railroads,  dispose  of  this  belief;  51%  of  all  employees 
during  December,  1917,  received  $75.00  per  month  or  less,  and  80% 
received  $100.00  per  month  or  les«.  Even  among  the  locomotive 
engineers,  commonly  spoken  of  as  highly  paid,  a  preponderating 
number  received  less  than  $170.00  per  month,  and  this  compensation 
they  have  obtained  by  the  most  compact  and  complete  organization, 
handled  with  a  full  appreciation  of  all  strategic  values.  Between 
the  grades  receiving  from  $150.00  to  $250.00  per  month,  there  is 
included  less  than  3%  of  all  the  employees  (excluding  officials),  and 
these  aggregate  less  than  60,000  men  out  of  a  grand  total  of 
2,000,000. 

"These,  it  is  to  be  noted,  are  not  pre-war  figures;  they  represent 
figures  after  a  year  of  war  and  two  years  of  rising  prices.    And  each 
dollar  now  (the  report  was  made  April  30,  1918)  represents  in  its 
power  to  purchase  a  place  in  which  to  live,  food  to  eat,  and  clothr 
to  wear,  but  71  cents  as  against  the  100  cents  of  January  1,  1916." 

WAGES. 

Wage  increases  granted  during  the  year  are  estimated  to  aggregate 
between  $600,000,000  and  $700,000,000  per  annum  and  in  a  large 
part  were  retroactive  from  January  1,  1918.  These  wages  were  fixed 
not  upon  the  theory  that  the  railroads,  a  permanent  industry,  should 
compete  in  prices  paid  labor  with  the  transient  war  industries,  many 
of  which  paid  very  hijih  wages  in  order  to  attract  labor.  Rather 
the  effort  was  made  to  find  a  just  and  equitable  basis  which  would 


21 

outlive  the  war  and  which  would  give  a  living  wage  and  decent  work- 
ing condition  to  every  railroad  employee.  Efforts  have  been  made 
to  eliminate  inequality,  and,  while  this  work  has  not  been  finished, 
it  has  been  chiefly  done. 

CONDITIONS  OF  EMPLOYMENT. 

On  February  21  General  Order  No.  8  was  issued,  containing 
among  other  things,  the  following: 

"No  discrimination  will  be  made  in  the  employment,  retention, 
or  conditions  of  employment  of  employees  because  of  membership 
or  nonmembership  in  labor  organizations". 

This  has  had  the  effect  of  many  railroad  employees  joining  labor 
unions  who  previously  were  not  affiliated  with  them.  At  the  .^ane 
time,  equal  consideration  has  been  shown  employees  who  were  not 
members  of  unions  and  individual  employees  have  been  heari  en  an 
equality  with  representatives  of  the  unions.  The  principle  of  the 
eight  hour  day  was  recognized  early  and  strengthened  whenever 
possible. 

Special  efforts  have  been  made  to  better  the  working  conditions  of 
the  women  in  railroad  service,  and  a  special  Woman's  Section  was 
established  in  the  Labor  Division  to  investigate  conditions  .surround- 
ing women  so  employed  and  apply  remedies  where  unfavorable  con- 
ditions were  found  to  exist.  In  General  Order  No.  27  it  was  ordered  v 
that:  -«< 

"When  women  are  employed  the  working  conditions  must  be 
healthful  and  fitted  to  their  needs.  The  laws  enacted  for  the  gov- 
ernment of  their  employment  must  be  observed  and  their  pay,  when 
they  do  the  same  class  of  work  as  men,  shall  be  the  same  as  that  of 
men." 

In  the  same  order  it  was  provided  that  where  negroes  performed 
the  same  service  as  whites,  they  should  receive  the  same  pay  as 
whites. 

LABOR  SHORTAGE. 

The  necessity  for  manning  the  American  Military  Railways  in 
France  with  trained  American  railway  men,  and  the  induction  into 
other  branches  of  the  Army  and  Navy  through  voluntary  enlist- 
ments or  through  the  draft,  of  many  railroad  employees,  added  to 
the  difficulties  throughout  the  year,  since  at  no  time  in  the  history 
of  the  American  railroads  has  there  been  a  greater  need  for  trained 
and  skilled  railway  help  than  during  the  war  period.  This  difficulty 
was  greatly  increased  by  the  influenza  epidemic  during  the  last  half 
of  the  year,  which  very  seriously  interfered  with  the  operation  of 
the  railroads  for  several  months. 


22 


EXPENDITURES  FOR  CAPITAL  ACCOUNT. 

On  February  2,  1918,  all  lines  under  Federal  control  were  di- 
rected to  prepare  and  send  in  budgets  of  improvements  immedi- 
ately required  to  increase  capacity  and  efficiency  and  to  promote 
safety  in  operations;  and  in  the  letter  of  instructions  the  following 
policy  was  prescribed: 

In  determining  what  additions  and  betterments,  including 
equipment,  and  what  road  extensions  should  be  treated  as 
necessary,  and  what  work  already  entered  upon  should  be 
suspended,  please  be  guided  by  the  following  general  princi- 
ples. 

(a)  From  the  financial  standpoint  it  is  highly  important 
to  avoid  the  necessity  for  raising  any  new  capital  which  is 
not  absolutely  necessary  for  the  protection  and  development 
of  the  required  transportation  facilities  to  meet  the  present 
and  prospective  needs  of  the  country's  business  under  war 
conditions.  From  the  standpoint  of  the  available  supply*- of 
labor  and  material,  it  is  likewise  highly  important  that  this 
supply  shall  not  be  absorbed  except  for  the  necessary  purposes 
mentioned  in  the  preceding  sentence. 

(6)  Please  also  bear  in  mind  that  it  may  frequently 
happen  that  projects  which  might  be  regarded  as  highly 
meritorious  and  necessary  when  viewed  from  the  separate 
standpoint  of  a  particular  company  may  not  be  equally 
meritorious  or  necessary  under  existing  conditions,  when 
the  Government  has  possession  and  control  of  the  railroads 
generally,  and  therefore  when  the  facilities  heretofore  sub- 
ject to  the  ex3lusivc  control  of  the  separate  companies  are 
now  available  for  common  use  whenever  such  common  use 
will  promote  the  movement  of  traffic. 

The  budgets  submitted  in  response  to  this  called  for  expenditures 
chargeable  to  capital  account — that  is,  exclusive  of  large  sums  charge- 
able to  maintenance — amounting  in  the  aggregate  to  $1,329,000,000 
which,  upon  careful  revision  was  reduced  to  $975,000,000.  This 
amount  has  been  increased  from  time  to  time  by  new  and  unfore- 
seen requirements,  and  particularly  by  large  orders  for  locomotives 
and  freight  cars,  until  the  improvements  definitely  authorized  to 
December  1,  1918,  amounted  to  $1,254,396,158.  Of  this  amount 
$551,925,525  is  for  Additions  and  Betterments;  $656,048,745  for 
Equipment,  and  $46,421,888  for  construction  of  Extensions, 
Branches  and  Other  Lines. 

The  expenditures  thus  authorized  were  for  improvements  classi- 
fied as  follows : 


23 


Class  of  work. 

Improvements 
authorized 
to  Dec.  1,  1918. 

Capital 
expenditures 
made  to 
Nov. 
1,  1918. 

Additions  and  Betterments. 

1.  Widening  Cuts  and  Fills,  Filling  Trestles,  etc. 
2   Ballasting  

$7.639,469 

9,852,098 

$3,694,433 
4,017,570 

3   Rails  and  other  Track  Material   

32  755,702 

13,024,510 

4    Bridges   Trestles   and  Culverts  

40  637,677 

20,970,333 

5    Tunnel  and  Subway  Improvements 

4  041  957 

879  371 

6    Track  Elevations  or  Depressions 

15  278  146 

3  126  307 

7    Elimination  of  Grade  Crossings 

12  175  753 

3  546  618 

8   Grade  Crossings  and  Crossing  Signals 

3  570  222 

993  300 

9.  Additional  Main  Tracks  

62,532,363 

25,378,978 

10.  Additional   Yard    Tracks,    Sidings,    and    In- 
dustry Tracks   

125,806,775 

47,534  458 

11    Changes  of  Grade  or  Alignment  

9  089  621 

2  887  221 

12    Signals  and  Interlocking  Plants  . 

16796192 

5  339  360 

13   Telegraph  and  Telephone  Lines 

5  789  737 

2  395  406 

14   Roadway  Machinery  and  Tools 

1  979  206 

1  167  706 

15.  Section  Houses  and  other  Roadway  Buildings 

3,058,495 
2,198,411 

2,119,588 
835903 

17.  Freight  and  Passenger  Stations,  Office  Build- 

47,963.570 

15,690,785 

18   Hotels  and  Restaurants  

754  674 

297803 

19    Fuel  Stations  and  Appurtenances    ... 

8  236  725 

3  197  554 

20   Water  Stations  and  Appurtenances 

11  879  643 

5  046  824 

21.  Shop  Buildings,  Engine-Houses,  and  Appur- 

57,229,566 

22  627  659- 

21,585,247 

6  383  153 

23    Electric  Power  Plants.  Substations,  etc  

22  454  729 

5  742  126 

24    Wharves  and  Docks  

5  163  966 

874  390 

25    Coal  and  Ore  Wharves  

5  532  284 

3  621  739 

26.  Grain  Elevators  and  Storage  Warehouses  
27   Real  Estate    

2.747,663 
4  298  189 

<•     2,111,911 
1  205  014 

98   Assessments  for  Public  Improvements 

3  063  271 

1  385  321 

34    All  other  Improvements 

7  814  181 

4  47Q  QQ<> 

Total    (Excluding   Equipment)  

$551  925  525 

$210  568  673 

Equipment. 
35   Locomotives    Steam  

$118  051  766 

$57  256  639 

Locomotives,  Steam  (Ordered  by  Railroad  Ad- 
ministration)      '.....  

76  873  355 

28  621  65^ 

%Q   Locomotives   Other    •.  .  .  . 

2  360  538 

QCC  770 

S7    Freight-train  Cars        

97  186  852 

70  221  fifil 

Freight-train  Cars  (Ordered  by  Railroad  Ad- 
ministration)                 .        .... 

989  460  000 

^Q  -1  qq  47.? 

15  866  432 

11  028  46° 

39    Work  Equipment  

7  677  891 

1  748  404 

40   Motor  Car  and  Trailers 

587  558 

KQ  -tftA 

5  415  350 

fi50  41  1 

629  621 

27fi  1  fiQ 

43    Improvements  to  Existing  Equipment  

41  939  382 

1  8  4QQ  Ofi4 

Total  Equipment  

$656  048  745 

$248  442  873 

44.  Construction   of  Extensions,   Branches,   and 
Other  Lines  

$46  421  888 

$18  1  QQ  4fifi 

Total  all  Work.  . 

$1.254.396.158 

$477  911  m  9 

24 

In  planning  improvements  chargeable  to  capital  account  other 
than  for  war  purposes,  the  rule  adopted  was  that  the  first  considera- 
tion should  be  safety  in  operations;  and  secondly,  increased  capacity 
where  that  was  needed ;  and  that  any  improvement  not  required  for 
these  purposes  should  be  deferred  until  after  the  war  unless  excep- 
tional circumstances  should  make  it  necessary  earlier.  Improve- 
ments designed  to  effect  permanent  economies  have  been  left  for  the 
favoring  times  and  conditions  of  peace,  unless  the  economy  was  so 
great  that  substantially  the  entire  cost  could  probably  be  saved  dur- 
ng  Federal  control. 

That  effect  of  the  foregoing  policy  is  shown  by  the  above  state- 
ment, from  which  it  appears  that  much  the  largest  item  was  for  ad- 
ditional yard  tracks,  sidings,  etc.  The  second  largest  item  was  for 
shop  buildings,  engine  houses,  and  appurtenances;  and  the  third 
for  additional  main  tracks;  and  by  the  large  orders  for  equipment 
;ilmost  wholly  for  locomotives  and  freight  cars. 

In  addition  to  the  locomotives  and  freight  cars  under  order  by  the 
railroad  companies  at.  the  time  the  Government  assujned  control, 
additional  orders  were  placed  for  1,430  locomotives  for  1918  de- 
livery, at  an  estimated  cost  of  $78,193,200,  of  which  542  have  been 
delivered  by  the  builders ;  and  also  an  'order  for  100,000  freight  cars 
for  1918  'delivery  at  an  estimated  cost  of  $289,460,000,  of  which 
there  has  been  completed  and  delivered  to  date  14,650  cars.  An  ad- 
ditional order  for  600  locomotives  for  1919  delivery  has  also  been 
placed,  involving  an  expenditure  of  approximately  $37,842,268. 
At  the  time  these  orders  were  placed  it  was  supposed  that  the  war 
might  last  much  longer  than  the  year  1918.  Practically  all  of  this 
equipment  has  been  assigned  to  those  railroads  whose  need  for  addi- 
tional power  and  equipment  appeared  to  be  the  greatest. 

COST  Ol    COAL   AND  OTHER  SUPPLIES. 

The  cost  of  coal  and  practically  all  other  supplies  used  by  the 
railroads  increased  enormously  during  the  year  just  passed,  as  com- 
pared with  the  cost  .during  the  year  1917.  The  increased  cost  of  fuel 
for  the  first  ten  months  of  the  present  year  was  $140,000,000  over 
the  cost  for  the  same  ten  months  in  1917,  and  during  the  same 
period,  the  cost  of  crossties  and  lumber  increased  approximately  $65,- 
000,000.  The  added  cost  of  coal  to  the  railroads  increased  in  spite  of 
the  fact  that  economy  in  the  use  of  coal  was  exercised  to*  such  an  ex- 
tent that,  for  instance,  on  the  Chicago  &  Northwesfern  Railroad  dur- 
ing the  month  of  October,  the  number  of  pounds  of  coal  per  passen- 
ger locomotive  mile  was  110.9  this  year  as  compared  with  124.3  last 
year,  and  the  number  of  pounds  of  coal  per  passenger  train  car  mile 


7 


25 

was  19.2,  this  as  compared  with  21.3  last  year,  and  yet  the  cost  of 
locomotive  fuel  per  locomotive  mile  was  34.9  cents  in  October,  1918, 
as  compared  with  27.9  cents  in  October,  1917.  On  the  Union  Pacific, 
during  the  same  month,  the  number  of  pounds  of  coal  per  passenger 
locomotive  mile  this  year  was  115.6  as  compared  with  131.8  last  year. 
On  the  same  line,  during  the  same  month,  the  number  of  pounds  of 
coal  per  passenger  train  car  mile  was  13.6  this  year  as  compared  with 
18.2  last  year,  and  yet  the  cost  of  fuel  per  locomotive  mile  was  33.2 
cents  in  October,  1918,  as  compared  with  32.6  cents  in  October,  1917. 
On  the  Chesapeake  &  Ohio  Railroad  the  number  of  pounds  of  coal 
per  passenger  locomotive  mile  during  the  same  month  was  142.6  this 
year  as  compared  with  136.1  last  year.  The  number  of  pounds  of 
coal  per  passenger  train  mile  on  the  same  road  during  the  same 
month  was  24.4  this  year  as  compared  with  24.9  last  year,  and  yet 
the  cost  of  fuel  per  locomotive  mile  was  35.3  cents»-in  October,  1918, 
as  compared  with  29.8  cents  in  October,  1917. 

THE  INCREASE  IN  RATES. 

;. 

The  increases  in  wages  and  the  greatly  enhanced  cost  of  coal,  iron 
and  steel  and  other  supplies  necessary  for  the  railroads,  made  neces- 
sary the  increase  of  both  passenger  and  freight  rates  during  the 
period  of  Federal  control.  Flat  percentage  increases  were  necessary 
to  obtain  the  required  revenue,  but  continuing  and  successful  efforts 
have  been  made  since  to  eliminate  inequalities  naturally  incident  to 
the  adoption  of  such  a  plan.  These  new  rates  did  not  go  into  effect 
until  practically  six  months  of  Federal  control  had  passed  and  there- 
fore only  approximately  six  months'  benefits  have  been  gained  from 
them  during  the  past  year,  whereas  increased  cost  of  labor,  coal  and 
other  supplies  has  operated  during  the  entire  year.  Economies  in 
operation  and  in  organization  have  resulted  in  enormous  savings, 
but  have  not  fully  met  the  difference  between  the  cost  of  operating 
the  railroads  and  the  income,  for  the  reason  stated.  The  benefit  of 
these  savings  will  not  be  fully  realized  until  the  operations  for  the 
year  1919  are  completed.  Very  little  benefit  has  been  received  in  the 
year  1918. 

INCREASED   COST   NECESSARY. 

/  » 

The  increases  in  cost  of  operation  which  have  occurred  in  the 
period  of  Federal  control  undoubtedly  would  have  been  equally 
operative  had  the  roads  remained  under  private  control.  If  the 
private  owners  had  operated  the  railroads  during  the  past  year  they 
either  would  have  had  to  increase  the  rates  as  the  Government  did  or 
thev  would  have  had  to  face  an  enormous  deficit. 


26 

FINANCIAL. 

From  the  reports  of  operations  for  10  months  ending  October  31. 
1 918,  and  with  November  and  December  estimated,  the  -net  operating 
income  of  the  roads  under  Federal  control  will  be  less  by  approxi- 
mately $136,000,000  than  the  standard  return  or  annual  rental 
which  under  the  law  the  Government  pays  for  the  use  of  the  rail- 
roads. This  deficiency  is  remarkably  small  in  the  circumstances 
because  the  increases  in  freight  and  passenger  rates  were  in  effect 
for  only  a  little  more  than  6  months  of  1918,  whereas  increased 
wages  and  increased  cost  of  fuel  and  all  other  railroad  supplies  were 
in  effect  for  the  entire  12  months.  If  the  increases  in  freight  and 
passenger  rates  had  gone  into  effect  January  1,  1918,  or  at  the  samQ 
time  that  the  increased  wages  and  cost  of  fuel  and  supplies  went 
into  effect,  it  is  estimated  that  there  would  have  been  a  substantial 
surplus  for  the  year  of  at  least  100  million  dollars  to  the  Govern- 
ment. 

For  the  year  1919,  with  all  wage  increases  granted  in  1918  operat- 
ing for  the  entire  12  months  and  upon  the  assumption  that  the* 
traffic  for  1919  is  substantially  the  same  as  in  1918,  and  that  the 
cost  of  fuel  and  supplies  remains  the  same,  it  is  estimated  that  there 
should  be  a  surplus  to  the  Government  over  and  above  the  standard 
return  of  approximately  $100,000,000.  It  is  to  be  expected,  how- 
ever, during  the  year  1919  the  cost  of  material  and  supplies  may  be 
reduced,  and  it  is  also  reasonable  to  expect  that  with  improved  opera- 
tion, under  normal  conditions,  relieved  of  the  intense  pressure  and 
excessive  cost  incident  to  the  war  necessity,  and  with  a  general  im- 
provement in  operations  and  use  of  facilities  and  equipment  that 
may  be  reasonably  expected  in  peace  time,  many  more  economies 
can  be  effected.  , Since  the  object  of  the  Government  should  be  at 
all  times  to  operate  the  railroads  not  for  profit,  but  at  cost,  and  to 
render  at  the  same  time  the  best  possible  service,  I  confidently  be- 
lieve that  it  will  be  possible  during  the  year  1919,  or  certainly  at  the 
end  of  the  year  1919,  to  effect  a  considerable  reduction  in  rates  unless 
the  traffic  for  1919  should  be  much  less  than  it  was  in  the  year  1918. 

INLAND    WATERWAYS. 

Hundreds  of  millions  of  dollars  have  been  expended  by  the  Na- 
tion, the  States,  and  citizens  for  the  pupose  of  developing  our  in- 
land waterways  and  for  the  construction  of  canals.  Thousands  of 
miles  of  rivers,  canals,  lakes,  and  bays  are  ready  to  assist  in  moving 
our  products.  These  waterways,  with  the  exception  of  the  Great 
Lakes,  are  not  being  extensively  used. 

With  the  assumption  of  my  present  task,  I  appointed  a  committee 
to  make  a  prompt  investigation  and  to  suggest  a  definite  plan  for  the 


27 

additional  use  of  internal  waterways,  for  the  economical  and  expe- 
ditious movement  of  the  traffic  of  the  country,  so  as  to  relieve  or 
supplement  the  railways  under  the  conditions  caused  by  the  war. 
This  was  the  beginning  of  a  program  which  has  been  constantly 
pursued,  and  while  the  greater  urgency  for  raw  materials  in  war 
work  interfered  with  the  construction  of  steamers  and  barges,  160 
steel,  wood,  and  concrete  vessels  are  now  building  and  50  steel  and 
wooden  craft  have  been  purchased.  The  total  appropriation  for 
old  and  new  floating  equipment  exceeds  eleven  and  three-quarter 
millions. 

The  increased  responsibilities  of  this  country  in  the  family  of 
nations  will  demand  greater  commercial  activity  on  our  part.  Trans- 
portation is  a  major  problem,  for,  on  account  of  the  extensive  area  of 
our  country,  we  have  a  longer  average  haul  to  seaboard  than  other 
industrial  commonwealths.  It  has  seemed  to  me  evident  that  by 
developing  transportation  on  the  waterways  and  co-ordinating  and 
articulating  them  with  a  unified  railway  system,  we  shall  bring 
about  a  correct  solution  of  the  rail- water  controversy,  which  has  been 
in  progress  for  fifty  years.  This  is  possible  with  the  railways  under 
Federal  control.  I  doubt  if  any  of  our  rivers  or  canals  will  become 
active  factors  of  transportation  if  the  railroads  are  turned  back  to 
private  control.  The  old  methods  of  railway  competition  with  the 
waterways  doubtless  will  be  revived  and  the  waterway  experiment 
may  not  be  able  to  survive  that  competition. 

In  furtherance  of  the  plans  for  waterways  transportation  a  Di- 
vision of  Inland  Waterways,  with  two  subdivisions,  was  created. 
The  Mississippi- Warrior  and  the  New  York  and  New  Jersey  Canal 
sections. 

Mississippi  River: 

Service  on  the  Mississippi  was  inaugurated  September  28th  with 
thirty-four  vessels.  Of  these,  twenty-three  are  leased  and  eleven 
were  purchased.  The  service  is  developing  satisfactorily  and  as 
tariffs  for  joint  rates  with  the  railroads  have  just  been  promulgated 
the  valley  will  be  afforded  traffic  privileges  not  possible  in  the  days  of 
railroad  competition.  Six  steel  steamers  or  towboats  and  forty  (two- 
thousand-ton)  steel  barges  are  under  construction  for  this  service. 
The  capacity  of  the  Federal  fleet  between  New  Orleans  and  St.  Louis 
will  approximate  a  million  tons  annually. 

Warrior  River: 

Nine  steamers  and  twenty-four  barges  were  purchased  for  Warrior 
River  service.  Six  steamers  and  twenty  barges  are  about  to  be  con- 


28 

structed.  This  fleet  will  be  capable  of  carrying  six  hundred  thou- 
sand tons  southbound  and  about  one  hundred  and  fifty  thousand 
tons  northbound.  The  Federal  improvements  on  the  Warrior  are 
complete  as  to  six  feet  of  water,  and  will  shortly  be  completed  as  to 
eight  feet  navigable  craft. 

New  York  Barge  Canal: 

The  congestion  existing  on  the  railroads  in  the  early  part  of  1918 
and  the  war  emergency  made  it  essential  to  prepare,  so  far  as  possi- 
ble, for  such  use  of  this  important  waterway  as  might  be  necessary  to 
assist  the  railroads,  and  although  it  was  announced  officially  that  the 
canal  was  completed,  there  was  practically  no  private  building  of 
equipment  for  use  on  the  canal,  and  many  of  the  old  boats  were 
being  diverted  to  other  uses.  During  the  season  the  Railroad  Ad- 
ministration leased  and  operated  upward  of  200  barges  on  the  Mew 
York  State  Barge  Canal,  and  contracted  for  the  construction  of  51 
steel  and  21  concrete  barges.  Delivery  of  the  new  barges  began  i|i 
December.  Construction  was  delayed  on  account  of  the  war  re- 
quirements for  steel.  It  turned  out  that  the  canal  had  only  7  feet 
navigable  depth  at  the  opening  and  it  was  not  until  midsummer 
that  all  the  boats  could  be  loaded  to  full  capacity  for  operation,  and, 
as  the  terminals  and  rail  connections  were  unfinished,  an  economical 
operation  was  not  possible.  In  fact  8%  feet  of  navigable  depth  was 
the  maximum  in  the  canal  during  the  season.  The  rail  congestion 
of  last  winter  was  relieved  before  the  canal  season  opened.  The  sus- 
pension of  imports,  the  decrease  in  road  and  industrial  building,  and 
the  deficiency  in  the  grain  crops  of  1917,  affected  very  seriously 
tonnages  that  under  normal  conditions  are  available  for  this  water- 
way. In  compliance  with  very  urgent  requests  of  the  people  of  the 
State  of  New  York  a  local  packet  freight  service  was  installed  be- 
tween Troy  and  Buffalo.  As  suitable  boats  were  not  obtainable,  and 
as  the  terminals  were  in  some  cases  unfinished  and  in  others  in- 
accessible, it  was  apparent  that  the  operation  would  not  be  profitable, 
and  results  justified  this  view.  It  is  to  be  noted  that,  although  the 
enlarged  canal  was  in  operation  all  season,  no  activity  was  displayed 
on  the  part  of  individuals  or  corporations  to  build  vessels.  The  Kail- 
road  Administration  has  repeatedly  announced  that  it  does  not 
assume  to  control,  nor  does  it  in  any  way  discourage,  the  operation  of 
pivately  operated  barges;  nor  does  it  fix  the  carrying  rate  for  inde- 
pendent vessels.  When  the  canal  and  its  facilities  are  completed, 
and  when  modern  vessels  are  available,  it  will  -be  possible  to  ascer- 
tain the  cost  of  transporting  traffic  on  this  waterway.  The  results 
obtained  during  this  formative  stage,  with  the  unavoidably  anti- 


29 

quated  equipment,  are  not  a  criterion  of  what  can  be  accomplished 
with  a  completed  canal  and  modern  equipment.  The  adjustment  of 
shippers  and  their  facilities  to  the  use  of  the  canal  is  also  a  matter  of 
time,  which  could  not  be  progressed  rapidly  with  the  conditions  ex- 
isting during  the  present  season. 


Delaware  &  Raritan  Canal: 

The  Delaware  &  Raritan  Canal,  connecting  the  Delaware  River 
with  New  York  Harbor,  from  1913  up  to  the  present  year  suffered 
a  steady  decrease  in  business.  In  1917,  272,734  tons  of  freight  were 
moved.  The  limited  draft  of  water  and  small  lock  structures  pre- 
vented profitable  transportation  operation  on  this  waterway.  It  be- 
came evident  last  spring  that  there  would  be  a  marked  decrease  in 
the  use  of  the  canal  for  transportation  of  coal,  due  to  the  fact  that 
coal  was  to  be  shipped  via  other  routes,  but  there  was  an  unusual 
demand  for  transportation  of  miscellaneous  freight  between  New 
York  and  Philadelphia  by  this  route.  The  canal  has  for  many  years 
been  under  lease  to  the  Pennsylvania  Railroad  Company  and  came 
under  Federal  control  as  part  of  its  transportation  system.  In  July 
the  New  York-New  Jersey  Canal  Section  took  charge  of  the  floating 
power  equipment  of  the  Railroad  Administration  on  the  canal  and 
December  1st  the  operation  and  maintenance  of  the  canal  was  trans- 
ferred to  that  section.  The  Railroad  Administration  also  operated  a 
fleet  of  packet  freight  ships  during  a  part  of  the  season.  There  are  a 
number  of  private  transportation  agencies  operating  on  this  canal. 
In  spite  of  the  loss  of  coal  tonnage,  the  total  freight  movement  on  the 
canal  will  slightly  exceed  1917. 

Chesapeake  &  Ohio  Canal: 

The  Chesapeake  &  Ohio  Canal,  connecting  Chesapeake  Bay  with 
Pennsylvania  and  West  Virginia  coal  fields,  has  been  operated  at  a 
loss  for  several  years.  At  the  beginning  of  the  season  of  1918  it  ap- 
peared that  unless  action  was  taken  to  support  navigation  on  thi.* 
canal  the  increasing  costs  would  cause  it  to  cease,  while  the  pressure 
of  traffic  at  that  time  upon  the  railroads  bringing  coal  to  Washing- 
ton and  vicinity  was  so  great  as  to  make  it  very  undesirable  that  they 
have  the  additional  burden  of  transporting  the  coal  previously  car- 
ried by  the  canal.  The  Railroad  Administration  therefore  for  a 
time  assumed  the  cost  of  canal  tolls  on  coal,  and  later  on  made  an  ar- 
rangement with  the  only  company  operating  boats  on  the  canal, 
which  insured  the  maintenance  of  the  service,  the  Railroad  AdmimV 


30 

> 

tration  paying  the  actual  cost  of  the  service  over  and  above  the 
freight  charges  which  were  paid  by  the  shipper  at  the  same  rate  as 
for  rail  shipments.  The  Railroad  Administration  also  furnished  ten 
new  barges  which  were  leased  to  the  operating  company. 

Ohio  River: 

The  Railroad  Administration  has  established  an  office  in  Cincin- 
nati, Ohio,  for  the  purpose  of  co-operating  with  shippers  and  vessel 
owners  and  studying  traffic  conditions  with  shippers  and  vessel 
owners.  In  view  of  the  fact  that  the  projected  locks  and  dams  on  the 
Ohio  River  between  Pittsburgh  and  Cairo  are  not  completed  (the 
movement  has  not  been  finished  even  between  Pittsburgh  and  Cin- 
cinnati) it  does  not  seem  a  proper  time  to  consider  any  new  equip- 
ment for  this  route. 

Lake  Keuka-New  York: 

The  service  formerly  operated  on  this  lake  by  the  Lake  Keuka 
Navigation  Company  had  been  discontinued,  and  in  order  to  move 
the  grape  crop  of  1918  the  Division  of  Inland  Waterways  operated 
equipment  of  the  Lake  Keuka  Navigation  Company  during  the 
grape  season. 

/  n  tracoastal  Waterways : 

The  intracoastal  waterway  from  Philadelphia  to  Beaufort,  N.  C., 
will  be  susceptible  of  greater  commercial  development.  The  pro- 
jected improvement  between  Norfolk  and  Beaufort  will  not  be  com- 
pleted for  some  time  and  it  will  require  at  least  two  years  to  modern- 
ize the  Chesapeake  &  Delaware  Canal.  The  improvement  ought  to 
l>o  authorized  promptly  and  I  hope  that  the  Congress  may  grant  the 
necessary  appropriation  and  power  to  deal  with  the  matter.  The 
fleet  operating  along  this  route  was  commandeered  to  a  considerable 
extent  during  the  war,  but  the  vessels  are  being  slowly  returned  to 
the  owners.  The  fleet  seems  to  be  sufficient  for  normal  conditions. 
The  capacity  can  be  considerably  increased  by  the  introduction  of 
modern  terminal  methods.  Ultimately,  packet  freight  service  on 
this  route  may  be  practicable. 

COASTWISE  SHIPS. 

The  fleets  of  vessels  of  railroad  ownership  were  augmented  on 
April  13,  1918,  by  the  taking  over  of  the  vessels  of  the  Clyde,  Mal- 
loryj  and  Southern  Steamship  Companies  and  the  Merchants  and 


31 

Miners  Transportation  Company,  comprising  64  passenger  and 
cargo-carrying  vessels,  operating  in  coastwise  service  between  various 
ports — Boston,  Mass.,  to  Galveston,  inclusive.  The  operation  of  the 
vessels  was  at  times  seriously  interfered  with  by  German  submarines. 
In  supporting  the  war  policy  of  the  Nation,  the  steamships  under 
Federal  control  were  used  in  war  work  to  the  maximum  extent.  The 
properties  of  the  Clyde,  Mailory,  and  Southern  Steamship  Com- 
panies and  the  Merchants  and  Miners  Transportation  Company  were 
relinquished  from  Federal  control  on  December  6th,  as  they  are  no 
longer  necessary  to  the  war  purpose. 

CAPE  COD  CANAL. 

The  Cape  Cod  Canal  was  taken  under  Federal  control  July  25, 
1918,  and  it  is  earnestly  hoped  that  it  will  be  operated  in  the  future 
by  the  Government.  Formation  of  shoals  had  reduced  its  navigable 
depth  to  17  feet  at  mean  low  water  when  the  Government  took  con- 
trol, but  the  Railroad  Administration  immediately  provided  $250,- 
000  for  dredging,  piling,  bank  protection  work,  etc.,  and  on  October 
23  the  Canal  was  opened  for  vessels  drawing  twenty  feet  six  inches 
of  water,  and  the  dredging  necessary  to  restore  the  original  depth  of 
twenty-five  feet  at  mean  low  water  is  expected  to  be  completed  by 
February  15,  1919.'  Improvements  have  been  made,  including  the 
installation  of  bank  protection  by  granite  rip-rapping.  In  spite  of 
the  fact  that  the  work  on  the  Canal  has  not  been  entirely  completed 
there  has  been  an  iiicrease  of  56.4  per  cent  in  the  number  of  vessels 
handled  and  114  per  cent  in  the  cargo  tonnage  transported  through 
the  Canal  in  1918  as  compared  to  1917. 

STANDARDIZATION  OF  LOCOMOTIVES  AND  CARS. 

Before  Government  control,  practically  every  important  railroad 
had  its  own  specifications  for  cars  and  engines.  Practically  all  were 
different  in  details.  Although  the  facts  are  not  obtainable,  it  has 
been  said  that  there  were  2,023  different  styles  of  freight  cars  and 
almost  as  many  different  styles  of  locomotives  included  in  the  equip- 
ment of  American  railroads  prior  to  the, war.  Complete  standard- 
ization of  course  is  impossible,  but,  as  rapidly  as  existing  rolling  stock 
and  engines  wear  out,  it  ought  to  be  practicable  to  replace  them  by 
standard  types.  During  the  period  of  Federal  control  progress  has 
been  made.  Some  twelve  standard  types  for  freight  cars  have  been 
agreed  upon,  and  it  has  also  been  decided  that  hereafter  only  six  dif- 
ferent types  of  locomotives  of  two  weights  each  shall  be  purchased. 
The  parts  of  these  various  locomotives  and  freight  cars  respectively 


32 

are  interchangeable.  The  importance  of  this  is  forcibly  illustrated  by 
an  instance  where  a  leased  locomotive  was  held  out  of  service  until 
over  $4,800.00  had  accumulated,  awaiting  a  part  which  would  cost 
not  to  exceed  $30.00.  Where  peculiar  conditions  exist,  however,  and 
where  special  types  of  locomotives  are  necessary,  permission  has  been 
given  to  depart  from  the  standardized  type  of  locomotive. 

CIVILIAN   INCONVENIENCES. 

While  such  a  great  work  was  being  performed,  inconveniences  to 
civilian  travelers  and  some  interferences  with  the  transportation  of 
ordinary  freight  in  the  United  States  were  unavoidable.  The  war 
necessity  came  first;  the  civilian  needs  of  America  second.  With 
a  limited  supply  of  passenger  and  freight  equipment  available,  and 
with  a  large  proportion  of  this  equipment  needed  for  the  movement 
of  troops  and  war  supplies,  there  were  not  sufficient  cars  and  locomo- 
tives remaining  to  fully  meet  civilian  needs;  nor  was  there  time, 
nor  materials  nor  labor  to  build  them.  This  was  explained  to  the 
country  early  in  the  year,  and  during  the  period  of  the  war  the 
people  generally,  when  they  realized  the  situation,  patriotically  ac- 
cepted it  and  made  sacrifices  accordingly. 

Whatever  incpnveniences  have  resulted  are  due  entirely  to  war 
conditions  and  are  in  no  way  related  to  the  fact  that  the  railroads 
were  under  Government  control.  Such  inconveniences  undoubtedly 
would  have  been  greater  under  private  control,  for  the  supply  of 
equipment  was  augmented  by  the  ability  of  the  Government  to 
shorten  routes,  to  combine  facilities,  to  pool  equipment  and  motive 
power,  and  to  introduce  economies  which  the  roads  under  private 
control  could  not,  and  would  not,  have  introduced. 

I  desire  to  make  this  point  as  clear  as  possible,  for  it  is  necessary 
for  the  American  people  to  understand  the  facts  of  the  railroad 
situation,  if  this  big  problem  is  to  be  dealt  with  intelligently.  Pas- 
senger equipment  while  crowded  during  the  war,  was  crowded  be- 
cause much  of  the  equipment-  had  to  be  used  in  the  transportation 
of  troops,  it  was  not  crowded  because  the  Government  had  control 
of  the  railroads.  As  a  matter  of  fact,  many  thousands  of  passenger 
train  miles  were  saved  by  the  ability  of  the  Government  to  achieve 
results  which  private  owners  of  the  roads  could  not  or  would  not  have 
achieved.  During  the  period  of  Federal  control,  every  possible  econ- 
omy was  exercised  in  order  to  save  both  passenger  and  freight  equip- 
ment and  make  as  many  cars  and  locomotives  as  possible  available 
for  the  war  need  first,  and  for  the  needs  of  the  civilian  population 
next. 


33 


SERVING  THE  PUBLIC. 

While  putting  the  paramount  war  needs  of  the  Nation  first, 
nevertheless,  every  possible  effort  has  been  made  by  the  railroads 
under  Federal  control  to  serve  the  public  adequately  and  furnish 
every  possible  facility  for  carrying  on  the  ordinary  passenger  and 
freight  business  of  the  Nation.  The  railroads  are  public  servants, 
and  in  time  of  peace  the  first  consideration  should  be  to  furnish  ade- 
quate service  at  the  lowest  possible  cost.  To  keep  in  touch  with  the 
public  during  the  period  of  Federal  control  and  see  to  it  that  their 
needs  were  given  every  possible  consideration,  the  Division  of  Pub- 
lic Service  and  Accounting  was  established  soon  after  the  railroads 
were  taken  over  and  Hon.  Chas.  A.  Prouty  was  made  Director  of 
the  Division.  With  this  object  in  view,  traffic  committees  were 
early  established,  upon  which  the  public  was  given  representation. 
While  these  committees  have  no  authority  to  change  rates,  never- 
theless their  advice  and  recommendations  are  most  helpful.  What 
the  shipping  public  desires  above  everything  is  stability  of  rates  and 
reliability  and  adequacy  of  service.  In  the  past  thousands  of  rate 
changes  have  been  made  each  month  which  were  worse  than  un- 
necessary. While  passenger  and  freight  service  was  of  necessity 
interfered  with  during  the  war,  efforts  have  been  made  during  the 
past  year  to  keep  in  touch  with  State  railroad  commissions  and  other 
local  bodies  to  make  certain  that  well-grounded  and  important  com- 
plaints should  receive  prompt  attention. 

I  have  given  you  a  statement  of  the  transportation  conditions  a 
year  ago,  of  the  transportation  achievements  under  Federal  control 
during  a  year  of  war,  and  of  the  present  situation. 


THE    FUTURE. 

What  remains  to  be  considered  is  what  permanent  solution  of  the 
railroad  problem  should  be  adopted  and  what  shall  be  the  temporary 
form  of  railroad  control  pending  a  permanent  solution. 

In  December,  1917,  there  were  about  180  separate  operating  rail- 
road companies  in  the  United  States  with  operating  revenues  of 
$1,000,000  or  more  per  year  each;  73  of  these  companies  had  oper- 
ating revenues  of  $10,000,000  or  more  per  year  each.  There  were 
several  hundred  companies  whose  respective  operating  revenues  were 
less  than  $1,000,000  per  year. 


34 


POSSIBLE  SOLUTIONS. 

Broadly  speaking,  there  are  three  general  permanent  solutions  of 
the  railroad  question.  The  first  is  to  send  the  railroads  back  into  th- 
private  control  of  the  several  hundred  old  companies.  The  second  is 
to  have  outright  Government  ownership  and  control  of  all  the  rail- 
roads. The  third  is  to  reconstruct  the  railroad  map  along  logical 
lines,  so  as  to  wipe  out  these  hundreds  of  different  railroad  companies 
and  substitute  a  comparatively  few  companies,  which  under  strict  and 
close  Government  control  can  be  expected  to  combine  the  advantages 
of  Government  control,  including  unified  control  of  those  things 
where  it  is  needed,  with  the  advantages  of  the  initiative  of  private 
management.  I  am  not  committed  to  any  particular  plan.  I  wish 
to  lay  before  you  certain  reforms  which  I  think  are  indispensable 
and  without  which  any  so-called  solution  of  the  railroad  problem  will 
be  a  mere  disappointing  makeshift. 

* 

POLICY. 

I  am  frank  to  say  I  do  not  believe  that  these  important  reforms 
can  possibly  be  accomplished  if  we  are  to  have  in  the  future  several 
hundred  different  railroad  companies  as  we  have  had  in  the  past, 
or  even  a  hundred,  or  even  fi/ty  different  railroad  companies.  I  be- 
lieve they  can  all  be  accomplished  either  through  a  comparatively 
few  railroad  companies  or  through  single  Federal  control.  If  the 
country  prefers  to  continue  in  existence  the  hundreds  of  different 
railroad  companies  as  in  the  past,  I  believe  it  will  be  necessary  for 
the  country  to  abandon  the  hope  of  obtaining  most  of  the  funda- 
mental reforms  which  I  propose  to  point  out. 


THE  TERMINAL  PROBLEM. 

One  of  the  most  difficult  and  important  railroad  problems  in  this 
country  is  the  problem  of  terminal  facilities.  It  probably  means  more 
to  the  producing  and  consuming  public  in  the  matter  of  delays, 
inconvenience,  and  transportation  burdens  than  any  other  phase  of 
transportation.  It  is  generally  understood  that  the  delays  and  exces- 
sive costs  do  not  occur  principally  on  account  of  insufficiency  of 
facilities  on  the  road,  but  on  account  of  inadequate  terminals  and  of 
the  heavy  terminal  costs. 


35 

It  is  not  unnatural  that  this  should  be  the  case.  It  is  a  far  simpler 
proposition  to  haul  a  train  over  a  railroad  than  it  is  to  break  up  that 
train  in  a  terminal  and  distribute  its  cars  to  the  connecting  carriers. 
For  one  thing,  it  is  easier  to  provide  adequate  track  capacity  on  the 
railroad  itself,  most  of  which  runs  through  the  country,  than  it  is  to 
provide  adequate  track  capacity  in  a  terminal,  which  is  generally  in 
the  midst  of  a  great  city.  But  an  even  more  important  point  is  that 
when  the  train  is  being  carried  over  the  railroad  Between  terminals 
it  is  being  handled  exclusively  under  one  managament  and  on  a 
railroad  which  has  been  planned  with  unity  of  purpose.  But  the 
moment  a  train  gets  into  a  terminal  where  its  cars  must  be  separated 
and  delivered  to  connecting  lines,  then  we  have  to  deal  with  facil- 
ities which  have  not  been  planned  with  unity  of  purpose  and  which 
under  private  control  are  not  operated  under  a  single  management. 
The  ability  of  one  company  to  get  rid  of  the  business  depends  upon 
what  its  connecting  companies  have  provided  in  the  way  of  terminal 
tracks  and  other  terminal  facilities,  and  upon  the  way  in  which  those 
connecting  companies  carry  on  their  operations.  It  is  human  nature 
that  each  company  is  much  more  interested  in  looking  after  its  im- 
mediate exclusive  interests,  both  in  the  facilities  which  it  provides 
and  in  the  way  it  operates  them,  than  it  is  in  building  and  operating 
its  property  so  as  to  help  its  connections. 

Generally  speaking,  the  cities  of  this  country  and  the  railroad 
traffic  that  passes  through  them  have  wholly  outgrown  the  railroad 
terminal  facilities,  which  were  provided  many  years  ago  without  any 
conception  of  the  growth  of  the  country's  traffic.  It  is  difficult  to 
get  the  land  to  expand  the  terminals  of  any  one  railroad  and  each 
railroad  company  is  jealously  trying  to  prevent  some  other  railroad 
from  getting  the  advantage  in  new  terminal  facilities.  Each  rail- 
road company  wants  to  plan  its  new  terminals  so  as  to  help  its  own 
business  and  so  as  not  to  help  its  rivals.  It  is  true  that  at  times  under 
pressure  of  critical  necessity  some  of  the  railroads  at  some  cities  try 
to  combine  a  portion  of  their  terminal  plans  into  a  joint  terminal 
enterprise.  But  it  takes  years  for  the  railroads  to  agree  on  any  such 
matter,  and  the  comprehensiveness  of  the  particular  plan  is  gen- 
erally interfered  with  by  the  selfishness  of  some  particularly  pow- 
erful railroad  which  feels  that  it  can  preserve  certain  advantages  by 
refusing  to  put  into  the  joint  plan  certain  facilities  which  ought  to 
be  put  there  in  the  public  interest. 

The  effect  is  that  when  it  comes  to  terminal  properties  we  get  a 
clear-cut  conflict  of  interest  between  the  public  and  any  particular 
railroad  company.  The  public  wants  terminal  facilities  comprehen- 


36 

sively  planned  and  carried  out  so  as  to  promote  the  greatest  conveni- 
ence and  economy  for  all  concerned,  but  each  railroad  company  is 
anxious  to  preserve  any  particular  advantage  which  it  already  has 
and  to  increase  that  advantage  when  practicable.  This  clash  of  in- 
terests between  the  public  and  any  particular  railroad  company,  and 
between  the  different  railroad  companies  serving  a  particular  ter- 
minal, operates  to  produce  deadlocks  which  to  a  large  extent  prevent 
terminals  from  being  developed  so  as  to  meet  the  business  necessities 
and  ^o  as  to  serve  the  public  to  the  greatest  advantage. 

The  condition  exists,  and  is  largely  accounted  for  by  the  reasons 
above  given,  that  the  outstanding  shortcomings  in  railroad  trans- 
portation are  inadequacies 'in  terminal  facilities.  The  great  unnec- 
essary burdens  in  the  matter  of  inconvenience,  delay,  and  cost  for 
which  the  producing  and  consuming  public  have  to  pay  are  largely 
due  to  these  terminal  conditions.  There  can  be  no  successful  solu- 
tion of  the  railroad  problem  which  does  not  provide  a* solution  for 
these  terminal  difficulties.  The  greatest  opportunity  to  reduce  rail- 
road costs  for  the  future  and  to  promote  public  convenience  in  trans- 
portation for  the  future  will  be  found  in  the  solution  of  these  ter- 
minal problems. 

CINCINNATI AN    EXAMPLE. 

A  concrete  illustration  will  help  to  emphasize  the  present  diffi- 
culties. Cincinnati  is  an  important  gateway  between  the  North  and 
the  South. 

Three  important  railroads,  the  Chesapeake  &  Ohio,  the  Louisville 
&  Nashville,  and  the  Cincinnati  Southern,  reach  Cincinnati  by  cross- 
ing the  Ohio  River.  Four  other  important  railroads,  the  Big  Four, 
the  Baltimore  &  Ohio,  including  the  old  Cincinnati,  Hamilton  & 
Dayton,  the  Pennsylvania,  and  the  Norfolk  &  Western,  reach  Cin- 
cinnati on  the  north  bank  of  the  Ohio  River.  The  interchange  of 
traffic  between  these  lines  at  Cincinnati  is  enormous,  and  the  general 
public  has  a  vital  interest  in  this  interchange  being  accomplished 
with  the  least  possible  delay  and  expense.  Yet  conditions  are  such 
that  in  times  of  heavy  traffic  Cincinnati  is  badly  congested  with 
freight,  and  the  ability  of  all  the  railroads  mentioned,  not  only  with 
respect  to  handling  traffic  through  Cincinnati,  but  with  respect  to 
handling  other  important  traffic,  is  largely  hampered  by  the  inability 
to  get  rid  of  the  traffic  which  must  pass  through  Cincinnati. 

Each  of  the  three  railroads  approaching  Cincinnati  from  the  South 
has  a  bridge  across  the  Ohio  River.  The  Cincinnati  Southern  bridge 
and  the  Chesapeake  &  Ohio  bridge  are  so  light  that  they  cannot 


37 

accommodate  the  heavy  locomotives  which  are  used  on  those  roads, 
so  that  there  must  be  delay  and  cost  and  congestion  due  to  the  neces- 
sity for  changing  engines  south  of  the  Ohio  River  on  those  two 
roads.  The  Louisville  &  Nashville  has  the^fce  of  a  bridge  which 
has  only  a  single  track  and  is  therefore  entir^r  too  restricted  in  ca- 
pacity to  handle  the  traffic.  The  topographical  conditions  in  Cin- 
cinnati are  such  as  to  make  it  exceedingly  difficult  to  find  suitable 
ground  upon  which  to  construct  terminal  facilities/  and  the  densely 
populated  area  makes  terminal  facilities  extremely  costly.  A  con- 
siderable part  of  the  important  terminals  in  Cincinnati  is  subject  to 
overflow  in  times  of  high  water.  To  a  very  large* extent  the  traffic 
which  any  one  railroad  brings  into  Cincinnati  is  traffic  which  must 
be  moved  beyond  Cincinnati  by  some  other  railroad,  so  that  more 
than  one  railroad  generally  has  an  interest  in  providing  proper 

«cilities  for  all  the  traffic  moving  through  Cincinnati,  and  all  the 
.  ilroads  reaching  there  have  a  common  interest  in  avoiding  the  con- 
gestion at  Cincinnati  which  in  the  past  has  constituted  one  of  the 
most  serious  traffic  situations  in  the  country.  Yet  each  of  the  rail- 
road companies  has  its  separate  facilities,  and  while  there  have  been 
various  particular  arrangements  of  a  joint  character,  it  still  remains 
true  that  in  all  the  yearPthat  have  passed)  the-  railroad  companies 
under  private  management  have  never  been  able  to  get  together  and 
put  into  effect  any  comprehensive  plan  which  would  result  in  ter- 
minal facilities  equal  to  the  situation.  It  seems  fair  to  conclude  from 
the  failure  of  the  railroad  companies  in  the  past  to  accomplish  this 
result  that  they  probably  never  will  accomplish  it  in  the  future  under 
corresponding  methods  of  private  management. 

At  the  present  time  there  are  perhaps  from  25  to  30  freight  houses 
in  and  around  Cincinnati  which,  generally  speaking,  have  been  pro- 
vided primarily  for  the  particular  use  of  separate  railroad  companies 
and  without  any  purpose  of  combining  all  the  freight-house  facil- 
ities so  as  to  serve  the  general  public  to  the  best  advantage  and  at 
the  least  cost. 

fe  NECESSITY  OF  FINDING  REMEDY. 

It  is  evident  that  in  view  of  the  common  interest  which  the  rail- 
road companies  have  in  the  traffic  passing  through  Cincinnati  some 
comprehensive  plan  ought  to  be  worked  out.  No  one  railroad  com- 
pany can  live  to  itself  alone  in  a  terminal  like  Cincinnati.  No  one 
important  structure  should  be  plarmed  simply  from  the  standpoint 
of  a  particular  railroad  company.  The  entire  situation  should  be 
dealt  with  from  the  standpoint  of  the  general  public  interest  and 


38 

the  selfish  interests  of  any  particular  railroad  company  ought  to  be 
subordinated  to  the  general  interest.  Yet  under  private  manage- 
ment there  is  no  way  whatever  in  which  the  public  can  properly 
assert  and  accomplishes  needs,  and  the  result  both  in  construction 
of  facilities  and  in  dpR-ation  is  left  to  the  haphazard  play  of  the 
conflicting  ideas  of  seven  or  more  separate  railroad  companies  and 
plans  of  the  utmost  importance  are  subject  at  any  time  to  be  de- 
feated by  the  disagreement  of  one  or  more  of  these  companies. 

$45,000,000    NEEDED    AT    CINCINNATI. 

It  is  estimated  that  there  ought  to  be  spent  in  the  near  future 
about  $45,000,000  in  the  rehabilitation  of  Cincinnati  terminals,  so 
as  to  make  them  equal  to  modern  public  needs,  with  probably  $25,- 
000,000  additional  for  passenger  terminals.  Tins  involves  the  build- 
ing of  a  new  bridge  and  the  reconstruction  and  enlargement  of  tw^F 
other  bridges,  the  construction  of  convenient  arid  commodious 
freight  houses,  the  provision  of  adequate  belt  lines  and  adequate 
facilities  for  intercommunication  between  the  different  railroads. 
Practically  every  item  of  this  large  expenditure  involves,  directly  or 
indirectly,  the  interests  of  two  or  more  serrate  railroad  companies. 
In  fact,  virtually  the  whole  expenditure  has  to  be  made  in  the  com- 
mon public  interest  and  without  making  the  interest  of  any  one 
railroad  company  paramount  as  to  any  particular  item.  If  this 
matter  is  left  to  be  worked  out  by  the  separate  railroad  companies, 
without  any  controlling  public  authority  to  shape  up  the  whole  situ- 
ation for  the  benefit  of  the  general  public,  there  is  no  reason  to  be- 
lieve that  it  ever  will  be  successfully  worked  out.  Certainly  the 
railroad  companies  have  had  many  years  in  which  to  work  out  the 
problem  and  they  have  never  done  so.  If  the  problem  is  not  ade- 
quately solved,  the  result  will  be  that  a  great  burden  of  delay  and 
inconvenience,  uncertainty  and  cost  will  continue  to  rest  upon  the 
people  of  the  United  States,  simply  because  a  thing  which  ought 
obviously  to  be  done  at  Cincinnati  in  the  public  interest  is  not  done, 
and  it  will  not  be  done  because  the  power  of  Government  which 
ought  to  be  exercised  to  promote  the  public  interest  is  allowed  to  *• 
remain  dormant  and  subordinate  to  the  separate  interests  and  to  the 
disagreements  of  various  privately  managed  railroad  companies. 


SAME   CONDITIONS   ELSEWHERE. 


What  is  true  of  Cincinnati  is  true  to  a  large  extent  of  every  impor- 
tant terminal  in  the  country,  particularly  of  Chicago  and  the  ter- 


39 

minals  around  New  York  harbor.  In  the  aggregate  these  situations 
constitute  a  great  burden  and  menace  to  rail  transportation  and  a 
serious  obstacle  to  convenience  and  certainty  to  the  public  in  the 
performance  of  that  transportation.  These  situations  must  be  met 
if  transportation  in  this  country  is  to  be  performed  at  a  reasonable 
cost  and  without  the  intolerable  congestions  and  delays  which  have 
periodically  arisen  in  the  past. 

Nor 'is  there  any  just  reason  why  railroad  companies  should  fear 
that  such  a  comprehensive  development  of  terminals  is  going  to  inter- 
fere with  any  legitimate  separate  interests  of  the  railroad  companies 
in  the  event  they  shall  eventually  be  turned  back  into  the  old  form  of 
private  control.  Any  comprehensive  plans  of  terminal  improvement 
which  are  for  the  general  public  good  will  in  the  long  run  turn  out 
to  be  advantageous  to  every  separate  legitimate  railroad  route  in  the 
country.  No  matter  if  the  railroads  do  go  back  into  the  old  form 
of  private  control,  with  anywhere  from  100  to  200  separate  manage- 
ments, it  is  inevitable'  that  in  the  long  run,  and  perhaps  as  the  result 
of  long  years  of  hardship  upon  the  public,  there  must  be  some  com- 
prehensive legislative  solution  of  these  terminal  problems  in  the  gen- 
eral public  interest.  The  railroads  will  not  be  injured,  but,  on  the 
contrary,  will  be  benefited  by  a  prompt  public  dealing  with  these 
matters. 

OTHER    EXAMPLES. 

v 

As  a  simple  illustration,  it  is  evident  that  the  fact  that  the  Balti- 
more and  Ohio  passenger  trains  are  now  taken  into  the  Pennsylvania 
passenger  terminal  in  New  York  has  not  resulted  in  injur- 
ing the  Baltimore  and  Ohio  or  in  causing  any  injury  to  the 
Pennsylvania,  of  which  it  has  any  right  to  complain.  The 
public  has  been  enormously  convenienced.  If  private  control 
should  return,  it  is  not  to  be  anticipated  that  the  public  would 
again  be  subjected  to  the  inconvenience  and  delay  and  expense 
incident  to  the  Baltimore  and  Ohio  going  back  to  the  use  of  its  old 
and  inconvenient  passenger  terminal  at  Communipaw,  N.  J.  These 
terminal  reforms,  which  are  done  in  the  public  interest,  will  not  only 
be  of  immediate  and  lasting  benefit  to  the  public,  but  they  will  also 
turn  out  to  be  more  than  acceptable  to  the  railroad  companies  them- 
selves. 

TRANSPORTATION    STRINGENCY    THROUGH    FAILURE    TO    CONTROL 

TRAFFIC. 

The  situation  exists  in  this  country  that  the  transportation  needs 
of  the  people  are  national  and  interdependent,  despite  the  fact  that 


40 

the  railroads  are  local  and  independent.  Practically  every  commu- 
nity in  the  country  is  dependent  upon  a  national  and  not  a  local 
transportation  service.  It  is  not  true  of  any  community  that  it  can 
depend  wholly,  or  even  principally,  upon  its  local  railroad  to  trans- 
port what  it  produces  and  what  it  consumes,  because,  directly  or  in- 
directly, what  it  produces  must  in  some  form  go  far  beyond  that 
railroad  and  what  it  consumes  must  in  some  form. originate  beyond 
that  railroad.  Failure  of  transportation  at  the  Atlantic  seaboard 
causes  economic  waste  and  suffering  at  points  far  beyond  those  served 
by  the  railroads  which  reach  the  Atlantic  seaboard.  Extensive  fail- 
ure of  transportation  in  any  part  of  the  country  has  corresponding 
reactions  in  many  other  parts  of  the  country. 

Unavoidably  the  amount  of  transportation  to  be  performed  fluctu- 
ates from  season  to  season  and  between  good  years  and  bad.  At 
certain  seasons,  especially  in  prosperous  years,  the  railroads  are  con- 
fronted with  a  "peak  load",  or  a  maximum  load,  which  they  heve 
not  been  able  in  recent  years  to  handle  satisfactorily  under  private 
n i;m au< -n icnt.  There  has  been  widespread  congestion  of  cars,  bo^th 
loaded  ;m<l  empty,  in  certain  sections,  the  most  acute  shortage  of 
cars  in  other  sections',  an  inability  to  furnish  transportation  urgently 
demanded,  an  inability  to  get  the  freight  which  has  been  accepted 
for  transportation  to  destination  in  reasonable  time.  In  short,  Vve 
have  been  confronted  with  periodic  conditions  of  transportation 
stringency.  Diversified  private  management  has  proved  that  it  can- 
not avoid  or  meet  these  conditions. 

Perhaps  the  greatest  single  difficulty  is  that  under  private  manage- 
ment, with  each  company  trying  to  prevent  any  traffic  going  to  a 
rival,  the  amount  of  freight  loaded  has  been  dependent  almost  wholly 
upon  the  desire  and  opportunity  of  the  consignor  to  load  a  shipment 
and  get  a  bill  of  lading  for  it,  without  any  regard  whatever  to  the 
ability  of  the  delivering  railroad  to  dispose  of  the  traffic  at  destination 
at  that  time,  or  of  the  ability  of  the  consignee  to  receive  the  traffic, 
if  delivered.  The  result  has  been  the  indiscriminate  throwing  into 
the  stream  of  traffic  of  everything  which  consignors  wished  to 
throw  into  it,  and  this  has  led  to  the  most  acute  congestion  at  or 
near  destination,  analogous  to  an  "ice-jam"  or  "log-jam"  in  a  river. 
This  consequence  has  been  injurious  to  the  public  as  a  whole,  be- 
cause it  has  reduced  transportation  capacity  far  below  what  it  ought 
to  be;  has  led  to  the  greatest  uncertainty  and  delay  and  consequent 
interruption  and  injury  of  business,  with  'direct  disadvantages  to 
labor  and  to  the  producing  and  consuming  public.  It  is  apparent 
that  this  fundamental  difficulty  has  not  been  effectively  dealt  with 


41 

under  diversified  private  management.  It  is  difficult  to  see  how  any 
railroad  company  would  be  willing  deliberately  to  prevent  the  load- 
ing of  traffic  on  its  own  line,  when  it  is  able  to  handle  that  traffic, 
simply  because  eventually  the  traffic  may  be  a  source  of  embarrass- 
ment to  some  connecting  line.  Indeed,  it  has  been  found  prac- 
tically impossible  for  a  railroad  company,  which  is  itself  congested 
with  traffic  which  it  cannot  deliver,  to  show  sufficient  courage  to 
refuse  to  continue  receiving  traffic  and  to  insist  that  the  traffic  must 
go  forward  by  competing  lines. 

MET  BY  UNIFIED  CONTROL. 

These  conditions  have  been  substantially  met  under  unified  con- 
trol by  the  routing  and  distribution  of  traffic  over  the  available  lines 
and  by  the  establishment  of  the  "permit  system/7  whereby  traffic 
involving  potentialities  of  congestion  is  not  allowed  to  be  loaded  ex- 
cept upon  showing  that  it  can  be  delivered  to  and  taken  care  of  by 
the  consignee  at  destination.  During  the  autumn  months  of  1918, 
when  traffic  was  at  its  heaviest,  there  was  practically  a  complete 
absence  of  transportation  stringency,  which  in  the  immediate  pre- 
ceding years  had  amounted  almost  to  transportation  paralysis.  This 
condition  was  due  largely  to  the  "permit  system".  The  ability  to 
use  this  system  in  the  public  interest  and  regardless  of  any  actual 
or  apparent  embarrassment  to  any  particular  railroad  is  probably 
the  most  important  thing  in  preventing  traffic  congestion.  It  is 
feasible  and  easy  under  unified  control. 

One  of  the  essential  reforms,  therefore,  is  the  adoption  of  some 
system  to  control  traffic  in  the  common  interest. 

As  far  as  railroad  tracks  are  concerned,  the  mileage  of  road  tracks 
(as  distinguished  from  terminal  tracks)  appears  to  be  sufficient  to 
take  care,  generally  speaking,  of  a  much  larger  tonnage  than  can  be 
handled  through  the  terminals.  At  times,  however,  particular  rail- 
roads may  become  embarrassed  by  a  surplus  of  traffic,  even  though 
it  may  be  possible  to  care  for  the  traffic  at  the  terminal.  Under 
unified  control,  in  such  conditions,  the  surplus  traffic  can  be  di- 
verted to  some  other  railroad  reaching  the  same  destination.  Under 
private  control  this  has  not  been  possible.  The  company  which  was 
able  to  obtain  the  routing  of  the  traffic  has,  generally  speaking,  not 
been  willing,  even  though  unable  to  handle  the  traffic  successfully, 
to  let  it  go  to  a  rival  railroad.  The  public  ought  to  be  provided  with 
some  system  whereby  unused  railroad  capacity  may  be  used  in  the 
common  interest  in  times  of  stress. 


42 


EXPORT  TRAFFIC. 

One  of  the  most  important  classes  of  traffic  is  the  export  traffic,  and 
this  ought  to  be  greater  than  ever  in  the  future.  The  transfer  of 
such  traffic  at  the  seaport  from  the  railroad  car  to  the  ship  involves 
great  possibilities  for  congestion  and  delay.  Under  the  old  form  of 
private  management,  a  particular  railroad  company  naturally  wishes 
the  traffic  to  go  to  its  own  port,  and,  even  though  that  port  may  be 
momentarily  seriously  congested,  is  unwilling  to  turn  that  traffic  to 
a  rival  line  whose  port  may  be  free  from  congestion.  Undoubtedly, 
an  opportunity  exists  under  unified  control,  even  in  peace  time,  to 
apportion  the  traffic  among  the  ports  and  co-ordinate  rail  transporta- 
tion with  ocean  transportation  in  such  way  as  greatly  to  relieve  the 
strain  which  at  times  arises  from  the  inability  of  the  particular  rail- 
road company  to  consider  the  interests  of  ports  other  than  its  own 
and  to  co-ordinate  effectively  with  the  ocean  transportation.  What- 
ever the  solution  of  the  railroad  question  a  way  ought  to  be  found 
to  control  this  matter  in  the  public  interest  in  times  of  emergency. 

MOTIVE  POWER  AND  CARS. 

A  further  transportation  factor  of  great  importance  is  having  ade- 
quate locomotives  in  good  rop;iii-.  In  the  past  each  railroad  com- 
pany has  had  its  own  locomotives  and,  generally  speaking,  has  used 
them  exclusively  upon  its  own  rails.  If  some  of  them  were  tem- 
porarily idle,  there  was  not  generally  any  way  of  allowing  them  to 
be  used  temporarily  by  other  railroads  which  were  short  of  locomo- 
tives. In  cases  where  there  was  no  surplus  of  locomotives  anywhere, 
and  where  additional  locomotives  were  far  more  needed,  in  the  public 
interest,  in  some  sections  than  in  others,  there  was  under  private 
management  no  way  under  peace  conditions  of  taking  locomotives 
from  the  line  where  'the  public  interest  needed  them  least  and  put- 
ting them  into  service  upon  the  line  where  the  public  interest  needed 
them  most.  There- was  no  way  in  which  locomotives  could  be  mobil- 
ized so  that  they  can  be  used  where  they  will  do  the  public  the 
most  good.  This,  of  course,  has  been  accomplished  under  umiieci 
control  and  will  be  to  an  increasing  extent. 

The  availability  of  locomotives  depends  upon  their  being  in  good 
repair,  and  the  ability  to  repair  them  depends  upon  the  shop  capacity. 
Under  private  control  each  railroad  company  has  had  its  own  shops. 
If  those  shops  are  taxed  to  their  capacity,  it  is  not,  generally  speaking, 
convenient  to  turn  additional  locomotives,  needing  repair,  over  to  the 


43 

shops  of  other  railroad  companies  in  order  to  receive  the  repairs. 
The  result  is  that  shops  of  some  railroads  may  be  partly  or  largely 
idle  and  shops  on  other  railroads  may  be  wholly  unequal  to  the  tasks 
confronting  them.  Yet  private  management  has  never  been  able  to 
work  out  any  comprehensive  and  effective  way  for  "matching  up5' 
the  demand  and  supply  of  locomotive  shop  capacity.  This  impor- 
tant matter  has  been  handled  with  great  success  under  unified  con- 
trol and  can  be  developed  so  as  to  be  handled  more  systematically 
and  successfully  as  time  goes  on. 

COMPETITION. 

Under  private  management  there  has  also  been  an  Unnecessary  use 
of  locomotive  power  through  duplication  of  train  service  for  purely 
competitive  reasons,  whereas  under  unified  control  trains  can  be 
consolidated  so  as  to  release  for  useful  service  many  locomotives 
which  before  had  been  used  merely  in  transportation  rivalries,  and 
without  carrying  loads  to  their  full  capacity. 

It  is  obvious  that  cars  cannot  be  mobilized  and  utilized  to  the  best 
interest  of  the  public  as  successfully  under  diversified  private  man- 
agement as  they  can  be  under  unified  control.  When  each  railroad 
company  is  intent  upon  the  traffic  which  it  can  obtain  for  its  own 
line,  it  is  inevitable  that  the  most  carefully  drawn  rules  will  not  be 
fully  carried  out  and  that  there  will  be  a  temptation,  frequently 
irresistible,  for  a  railroad  company  to  retain  cars  for  its  own  purposes, 
when  the  public  interest  requires  that  those  cars  should  be  devoted  to 
some  other  purpose.  It  is  also  true  that  the  handling  of  empty  cars, 
so  as  to  get  them  in  the  quickest  time  to  the  place  where  they  are 
most  needed,  cannot  be  handled  as  well  under  private  control,  be- 
cause .  the  transportation  of  the  empty  car  gives  the  transporting 
railroad  no  revenue,  and  hence  it  is  not  disposed  to  encourage  any 
such  transportation,  except  to  the  extent  that  it  has  had  the  benefit  of 
the  car  when  loaded  and  producing  revenue.  And  yet,  in  many  in- 
stances, in  order  to  reach  the  place  where  it  is  most  needed,  the  car 
ought  to  be  hauled  by  a  line  which  has  enjoyed  no  revenue  from 
the  car  when  it  last  moved  under  load.  The  results -of  unified  man- 
agement show  important  advantages  resulting  from  unified  control 
of  the  car  supply.  These  advantages  are  strikingly  apj  arent  in  the 
case  of  special  types  of  cars,  as,  for  example,  tank  cars  and  refriger- 
ator cars. 

Any  permanent  solution  of  the  railroad  question  ought  to  give  the 
public  the  advantage  in  times  of  stress  of  the  mobilization  of  locomo- 


44 

tives  and  locomotive  repair  shops,  and  of  the  handling  of  all  equip- 
ment in  the  public  interest,  including  the  emergency  handling  of 
empty  equipment. 


RATES. 

In  the  matter  of  rates,  an  immense  advantage  resulting  from  uni- 
fied control  is  that  rates  can  be  made  only  so  high  as  may  be  neces- 
sary to  protect  the  situation  as  a  whole,  through  paying  the  total  ex- 
penses and  producing  only  a  sufficient  resulting  operating  income  to 
represent  a  fair  compensation  for  the  property  employed.  But  under 
separate  management,  there  is  the  greatest  diversity  in  the  pros- 
perity of  the  railroad  companies.  Some  will  prosper  on  very  low 
rates  and  some  will  fail  on  very  high  rates.  The  result  is  either 
that  rates  must  be  maintained  on  an  average  basis  which,  while  pro- 
ducing high  profit  for  some  railroads,  will  still  leave  other  railroads 
in  bankruptcy,  or  must  be  made  sufficiently  high  to  leave  a  margin 
of  profit  to  the  less  prosperous,  with  consequently  excessive  profits 
to  the  most  prosperous.  The  former  course  will  result  in  the  less 
prosperous  roads  being  unable  In  perform  their  public  service  suc- 
cessfully. The  latter  course  will  result  in  the  public  being  burdened 
with  unnecessarily  high  rates.  Under  unified  control  rates  which  are 
sufficiently  high  on  an  average,  to  protect  the  general  situation,  will 
insure  an  adequate  service  on  all  roads  and  will,  at  the  same  time, 
protect  the  public  against  rates  being  made  any  higher  than  is  neces- 
sary to  meet  the  real  necessities  of  the  situation.  I  do  not  believe 
there  can  be  any  successful  solution  of  the  railroad  problem  which 
leaves  in  existence  the  great  disparity  in  the  results  of  the  same  rates 
to  different  railroad  companies  because  this  will  always  cause  ques- 
tion as  to  the  propriety  of  any  scale  of  rates  and  will  keep  the  rate- 
question  in  constant  turmoil. 


RESULT. 

I  believe  that  even  under  the  handicaps  of  war  conditions  a  suffi- 
cient showing  has  been  made  to  indicate  that  all  the  reforms  I  have 
mentioned  are  desirable  as  permanent  peace  measures.  Yet  it  is 
clear  that  the  general  public  has  not  had  an  opportunity  to  appre- 
ciate this  and  to  weigh  the  real  value  of  what  has  been  accomplished. 
There  has  not  yet  been  an  opportunity  to  give  the  public  knowledge 
of  the  facts.  In  view  of  the  far-reaching  importance  of  any  solution 
of  the  railroad  question  which  may  be  adopted,  the  public  is  entitled 
to  have,  before  the  present  Federal  control  shall  be  terminated,  a 


45 

reasonably  fair  test  under  peace  conditions  of  the  advantages  to  be 
derived  from  these  reforms. 

When  Congress  comes  to  take  the  responsibility  of  making  a  final 
decision  as  to  which  is  the  best  permanent  solution  of  the  railroad 
problem,  'one  of  the  most  important  considerations  to  which  it  must 
give  attention  is  the  question  as  to  which  solution  will  involve  the 
least  financial  burden  for  the  future  upon  the  American  public. 
This  being  true  it  seems  to  me  of  the  highest  importance  that  Con- 
gress should  have  an  opportunity  to  form  an  accurate  idea  as  to  the 
cost  of  unified  control  of  railroad  operations  under  peace  conditions. 
In  order  to  have  an  accurate  idea  on  this  subject  Congress  ought  to 
have  before  it  at  least  the  operations  of  the  year  1919  under  Federal 
control.  Of  course  these  figures  cannot  be  ready  until  the  spring  of 
1920.  If  Congress  undertakes  to  make  its  permanent  solution  of  this 
great  problem  prior  to  that  time  it  will  do  so  without  any  adequate 
comparison  between  the  cost  of  railroad  operation  under  diversified 
private  control  as  in  the  past,  and  the  cost  of  railroad  operation  under 
unified  control  during  peace  time.  It  is  true  that  the  figures  for  the 
year  1918  will  be  available  in  about  two  months,  but  these  figures  will 
represent  the  operations  under  war  conditions  when  the  railroad 
management  was  subjected  to  many  difficulties  which  will  not  exist 
undet  peace  conditions,  and  when  a  great  deal  of  traffic  had  to  be 
handled  regardless  of  cost  in  order  to  meet  the  insistent  emergencies 
of  war.  It  also  happens  that  the  year  1918  includes  the  operations 
of  the  most  severe  and  costly  winter  that  has  ever  been  experienced  in 
the  life  of  the  railroad  business  in  this  country,  and  the  cost  of  clear- 
ing up  the  most  serious  congestion  of  traffic  in  the  history  of  the  rail- 
roads— a  congestion  existing  at  the  time  Federal  control  was  assumed. 
Therefore,  unless  a  final  solution  of  this  problem  is  deferred  until  a 
reliable  view  of  the  economies  which  actually  arise  out  of  unified 
operation  can  be  obtained,  the  result  will  be  the  adoption  of  a  perma- 
nent solution  in  ignorance  of  one  of  the  most  important  factors  to 
be  considered. 

VALUATION. 

It  must  be  remembered  also  that  Congress  has  thought  it  impor- 
tant to  provide  for  a  valuation  of  railroad  property,  and  this  valua- 
tion has  been  in  progress  for  several  years  at  lafge  cost.  1  assume 
that  it  will  be  completed  in  the  next  two  pr  three  years.  There  is 
widespread  conviction  that  no  permanent  solution  whatever  of  the 
railroad  problem  can  be  made  which  does  not  put  at  rest  the  present 
insistent  clainis  as  to  railroad  overcapitalization.  The  question 
therefore  arises  "whether  Congress  can  satisfactorily  deal  with  this 


46 

matter  in  advance  of  the  completion  of  the  valuation  which  it  has 
already  prescribed,  and  whether  Congress  will  wish  to  attempt  a  final 
solution  of  it  before  it  can  have  the  benefit  of  the  valuation  for  which 
it  has  already  appropriated  such  large  amounts  and  to  which  it  has 
attached  so  much  importance.  It  is  not  possible,  as  I  view  the  com- 
plexities of  the  problem,  to  effect  any  marked  change  in  the  form  of 
railroad  control  that  is  not  based  upon  a  completed  valuation  of  their 
properties. 

SHIPPING  AND  THE  RAILROADS. 

The  glorious  victory  for  democracy  in  which  America  has  played 
such  a  noble  and  conspicuous  part  has  given  her  a  commanding 
position  in  world  affairs.  Our  own  material  development  makes  it 
more  than  ever  necessary  {hat  we  shall  have  access  upon  just  and  fair 
terms  to  the  markets  of  the  world  for  the  disposition  of  our  surplus 
products.  We  cannot  meet  this  situation  unless  we  are  prepared  to 
go  forward  immediately.  Opportunity  does  not  wait  for  the  laggard, 
whether  that  laggard  bo  a  nation  or  an  individual.  America  must 
go  forward  immediately  and  organize  her  resources  effectively  for 
tiro  purpose  if  she  is  to  enjoy  her  share  of  the  fruits  of  the  keen  and 
friendly  rivalries  in  commerce  in  which  she  niusl  engage  with  other 
nations. 

Under  the  provisions  of  the  United  Stales  Shipping  Act,  the  great 
merchant  marine  we  are  constructing  is  to  be  under  Government 
control  for  a  period  of  five  years  from  the  conclusion  of  the  European 
War.  If  our  splendid  merchant  fleet,  built  with  the  money  of  the 
people  of  the  United  States  at  a  cost  of  more  than  one  billion  dollars. 
is  to  be  used  successfully  in  their  interest,  it  must  be  operated  in 
effective  co-ordination  with  the  great  railroad  systems  of  the  United 
States.  They  must  work  together  harmoniously  and  reciprocally. 
During  this  great  period  of  world  development,  involving  the  vital 
welfare  of  the  American  people,  it  seems  to  me  peculiarly  wise  that 
the  period  of  Federal  control  of  railroad  transportation  shall  be  made 
concurrent  with  that  of  Government  ship  control.  Then  we  shall 
have  a  great  transportation  system  on  land  and  sea  furnishing  the 
reliable,  effective  service  which  will  protect  the  interests  of  the 
American  people  and  carry  them  forward  upon  a  career  of  prosperity 
and  success  unequaled  in  any  previous  period  in  their  history. 

CONCLUSION. 

This  is  why  I  have  urged  that  Federal  control  be  extended  until 
January  1,  1924.  It  will  be  impossible  to  view  the  results  of  even 


47 

one  year  of  Federal  control  under  peace  conditions  until  the  spring 
of  1920,  and  it  will  then  be  too  late  for  Congress  to  legislate  before 
the  end  of  the  21  months'  period.  Even  if  it  were  possible  to  accom- 
plish legislation  in  the  next  12  months,  it  would  be  done  without 
any  opportunity  whatever  to  form  a  reasonable  idea  as  to  the  advan- 
tages of  unity  in  the  matters  I  have  mentioned,  under  peace  con- 
ditions. 

Moreover,  the  operations  under  peace  conditions  with  a  tenure  so 
short  as  the  21  months'  period  cannot  possibly  constitute  a  fair  test. 
With  such  a  rapidly  approaching  termination  and  with  every  officer 
and  employee  naturally  speculating  on  his  relations  to  the  new 
management,  whatever  it  may  be,  it  will  be  impossible  to  secure  the 
best  results  from  the  railroad  organization,  and  the  nearer  the  termi- 
nation approaches  the  more  difficult  will  be  the  situation. 

Indeed,  the  difficulties  with  operation  during  the  21  months'  period 
will  be  so  serious  that  I  do  not  see  how  the  Government  can  be  fairly 
asked  to  encounter  them.  It  will  be  asked  to  continue  an  operation 
deprived  of  all  the  elements  which  would  help  in  making  the  opera- 
tion a  success,  and  I  do  not  see  how  it  can  be  seriously  urged  as  the- 
proper  course  by  anyone  except  those  who  are  anxious  at  all  events 
to  see  the  railroads  restored  to  the  control  of  numerous  different 
companies,  just  as  in  the  past.  It  seems  to  me  that  anyone  who 
wishes  a  fair  and  dispassionate  study  made  as  to  what  is  the  best 
ultimate  solution  and  as  to  the  extent  to  which  the  reforms  I  have 
mentioned  are  in  the  interest  of  the  American  public,  and  as  to  the 
way  in  which  those  reforms  can  best  be  accomplished,  if  in  the  in- 
terest of  the  American  public,  must  be  anxious  to  have  a  reasonable 
period  of  Federal  control  after  the  war,  under  conditions  calculated 
to  make  for  tranquillity  and  single-mindedness  upon  the  part  of  the 
Federal  railroad  organization.  I  do  not  mean  that  this  would  be 
desired  in  order  to  accomplish  Government  ownership,  but  it  seems 
to  me  it  would  be  desired  in  order  to  test  the  utility  of  various  re- 
forms in  the  direction  of  unification  which  can  be  accomplished 
without  Government  ownership,  but  which  cannot  be  accomplished, 
as  I  view  the  situation,  through  an  unrestricted  return  to  the  old 
conditions  of  management,  through  from  75  to  100  different  impor- 
tant railroad  companies  and  several  hundred  smaller  railroad  com- 
panies. 

The  21  months'  period  will  be  entirely  too  short  to  accomplish 
any  effective  results  with  respect  to  improvements,  and  especially  the 
terminal  improvements  which  are  peculiarly  needed.  Indeed,  with 
such  an  early  termination  of  Federal  control,  there  will  be  almost 
a  complete  stoppage  of  improvement  work,  except  what  is  obviously 


48 

needed  for  the  most  urgent  necessities.  The  result  will  be  that  ter- 
minal reforms,  which  are  badly  needed  in  the  public  interest  and 
which  already  have  been  delayed  many  years,  will  be  subjected  to 
further  indefinite  delay.  It  will  also  be  true  that  needed  railroad 
construction  and  extensions  will  be  practically  at  a  standstill. 

In  the  nature  of  things  the  concurrence  of  the  railroad  corpora- 
tions cannot  be  expected  in  matters  of  improvements  and  extensions 
during  the  21  months'  period  except  as  to  things  of  the  most  urgent 
and  obvious  necessity  and  where  there  is  no  possibility  of  conllict 
with  the  selfish  interest  of  the  particular  corporation.  This  is  not 
surmise,  because  the  evidences  of  it  are  already  appearing — notably 
in  the  case  of  locomotives — where  budgets  were  submitted  by  the  cor- 
porations calling  for  their  purchase,  and  where  even  now. many  of 
the  corporations  are  challenging  the  purchase  of  locomotives  made 
for  their  account  and  within  the  limits  of  their  requests.  It  is  nat- 
ural that  each  company  will  prefer  to  hold  all  other  matters  in  abey- 
ance in  the  hope  that  it  can  make  its  own  r  ins  in  its  own  way*at 
the  end  of  Federal  control.  This  condition  will  not  exist,  however, 
if  a  five-year  extension  shall  be  granted.  During  the  early  part  of 
that  extension  comprehensive  improvements  can  be  carried  forward 
in  the  public  interest,  and  the  railroad  companies  will  appreciate 
the  impracticability  of  holding  everything  in  abeyance  for  so  long 
a  period  as  five  years.  Of  course,  as  the  five-year  period  nears  its 
termination,  there  would  be  a  disposition  on  the  part  of  the  corpora- 
tions to  postpone  matters  which  had  not  theretofore  been  entered 
upon,  but  by  the  time  this  condition  would  arise  it  is  reasonable  to 
expect  that  Congress  would  have  been  able  to  make  a  permanent 
solution  of  the  whole  problem  in  the  light  of  an  adequate  experience 
with  the  present  opportunities  for  unified  control. 

With  the  five-year  extension  it  will , be  practicable  for  Congress — 
say  within  two  years  from  now — to  enter  upon  a  permanent  solution 
of  this  question  after  Congress  and  the  country  shall  have  had  before 
it  the  result  of  a  complete  year's  experience  of  Federal  control  under 
peace  conditions,  ^avs  -\\-g\\  asiv^ear's  experience  under  war  conditions. 
Congress,  with  that  aotdftionai  experience,  will  be  able  far  better  than 
it  is  at  present  to  estimate  at  their  real  vakie  the  reforms  which  1 
have  submitted  to  you  as  being  fundamental,  and  Congress  can  then' 
determine  whether  those  reforms  are  so  important  as  to  make  it  de- 
sirable to  adopt  some  other  method  of  railroad  ownership  and  control 
than  that  of  such  a  great  number  of  different  private  companies  as 
has  been  the  case  in  the  past. 


" » 


LOAN  DEPT. 


Manufacture* 

jttAYLORD  BROS.  Inc. 

SyrocuM,  N.Y. 

Stockton,  Calif. 


